Foolish Forecast: All Powder at Vail Resorts

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Resort operator Vail Resorts (NYSE: MTN) will report third-quarter 2008 financial results tomorrow, June 5. Let's book a reservation for the outlook.

What analysts say:

• Buy, sell, or waffle? It looks like it’s all powder for Vail, as all eight analysts covering the ski resort operator rate it a buy.
• Revenue. With the quarter taking in much of Vail's high season, sales are expected to rise 28.5% to $474.8 million.
• Earnings. Profits are also expected to mount, climbing 21% to $2.41 per share.

What management says:
The primary driver for a ski resort is snow, and the area had enjoyed some splendidly powerful storms that dumped a lot of the white stuff on Vail's resorts. That will undoubtedly attract a lot of skiers to its premier locations, but it will attract even more European vacationers, who will benefit from the weak dollar. They'll get more bang for their buck skiing in Colorado than in the Alps. Management saw fit last quarter to reiterate guidance for the full year, based on the strong snow season it was enjoying. Since the third quarter is the back half of the prime ski season, it should be strong.

What management does:
This Motley Fool Hidden Gems pick should expect to see continuing weakness in the real estate market; Vail's real estate segment revenue dropped almost 20% from the year-ago quarter.

	01/07	04/07	07/07	10/07	01/08
Gross	23.5%	23.9%	23.2%	23.6%	22.9%
Operating	14.2%	14.9%	13.9%	14.1%	13.3%
Net	5.8%	6.7%	6.5%	7.8%	7.7%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
With some top resorts in its portfolio and a strong season in play, Vail Resorts should indeed turn in a top-rated performance this quarter. Even though real estate may be weak, Vail has still been seeing strong demand for its luxury units -- so much so that it raised the membership fee at its Mountain Club.

At 19 times forward earnings, Vail is priced higher than rivals for discretionary spending like Host Hotels & Resorts (NYSE: HST), Marriott (NYSE: MAR), and Starwood Hotels & Resorts (NYSE: HOT). Unlike them, however, Vail is expecting to see significant revenue and earnings growth, while its competitors are looking at falling profits and flat earnings.

When I evaluated Vail's stock for the Hidden Gems community back in March, I thought a case could be made for establishing a position at the time, though I prefer a larger margin of safety. Since then, Vail's shares have appreciated by 20% or so, and while the quarter may indeed prove good, the price might be approaching a level where I'd look for discounts first before I committed. With a weak fourth quarter possibly in the forecast, I'd wait for fresh snows to fall.

Related Foolishness:

• Downward Slope for Vail Resorts
• Foolish Forecast: Climbing Vail Resorts Mountain
• Foolish Fundamentals: Margins