It's been a wild ride at Six Flags, where cold and wet weather cast a storm cloud over second-quarter financials. Earnings came in $0.08 a share below estimates, but some analysts are also marking down next year's prospects for the amusement park specialist. When Six Flags mascot Bugs Bunny asks, "What's up, Doc?" it's not the stock.
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The results were well off the $0.20 a share consensus estimate.
For the leisure giant set on revitalizing its 36 global parks with attractions themed to Looney Toon characters and DC Comics superheroes, the cool rains of June proved to be fundamental Kryptonite. The news didn't come as a surprise to industry watchers who heard competitor Cedar Fair (NYSE: FUN) warn of a similar fate two weeks ago.
The downhill slide might still be packing a little more air time. Smith Salomon Barney and Merrill Lynch downgraded the company earlier this month after rain fell on some of the prized Northeastern properties for 10 consecutive days late last month.
As seasonal companies who live and die by the second and third quarters of park operations, will the dark clouds of July deem the whole year a washout? Probably. But absent analysts who minored in meteorology, does this dampen the company's prospects for next year? Smith Salomon Barney's Jill Krutick lowered 2001's EBITDA estimates from $500 million to as low as $450 million. Why? Have shorts perfected the rain dance? Will Wall Street have the kinks worked out of its weather-altering machine by next summer?
It's a shame because Six Flags, which until last month was known as Premier Parks, was starting to come into its own. The company acquired the Six Flags chain from Time Warner (NYSE: TWX) back in 1998 and cashed in on the synergy immediately. It rebranded its Kentucky Kingdom park under the Six Flags banner and the park produced a 35% uptick in revenues that same summer. Since then the company has gone on to upgrade most of its parks with Six Flags prefixes and thrill rides. It's worked every time. The four latest makeovers reported 32% growth in attendance despite the unfavorable climate.
Will the Internet come to the rescue? The company has teamed up with America Online (NYSE: AOL) to give away a million free tickets to AOL subscribers (Keyword: Six Flags). The promotion is part of an alliance announced back in June that also finds the world's leading online service being promoted to the chain's 50 million annual parkgoers. Ironically, it places Six Flags back into business with former parent and eventual AOL acquisition Time Warner.
The ticket giveaway is clever since only one freebie is being granted per household. The park will still make money thanks to successful initiatives to drum up per-capita guest spending -- yes, beyond the $4 poncho purchases. The tickets must be used by September 24, 2000. Sweet. Just in time to shore up third-quarter results. That is, of course, if gray skies go blue.
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