What: Shares of Six Flags Entertainment Corporation (NYSE: SIX) roared 14% higher last month, according to data from S&P Capital IQ as investors cheered on a strong quarterly earnings report.
So what: The theme park operator announced that revenue improved 6% to $575 million, ahead of expectations of $561 million. Its bottom line jumped 52% to $1.64 per share, though that actually missed estimates of $1.66. The summer months of the fiscal third quarter are especially critical for the company as it operates at a loss for much of the rest of the year, and the company is on track to deliver record revenue for the sixth year in a row after filing for bankruptcy protection in 2009.
The theme park industry has roared back following the financial crisis -- full-year attendance is up 9% at Six Flags. Management credited a 25% increase in sales of annual passes for the strong quarter and said the company is well-positioned to reach its goal of $600 million in modified EBITDA by 2017. Management has also boosted its per-share earnings by aggressively buying back stock. Year-to-date, the company has repurchased 4.1 million shares, or more than 4% of its total shares outstanding.
Now what: Six Flags followed up the record quarter with a 12% quarterly dividend hike in early November to $0.58, good for a 4.5% yield. The stock has been a steady winner since the recession as shares have more than quadrupled over the past five years. However, at a price-to-earnings of more than 40 times, Six Flags shares aren't cheap, but its solid track record of growth, healthy dividends, and aggressive share repurchases have earned some of the premium valuation. Add to that a strengthening economy and low gas prices which are putting more money in consumers' pockets for discretionary purchases like theme park admissions.
With those trends likely to continue and the company executing on its strategic goals, shares should move higher into next year.
