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Can Disney Follow the Lead of Cedar Fair and Six Flags?

By Rick Munarriz – Nov 3, 2016 at 12:18PM

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The world's leading theme park operator reports next Thursday. Attendance likely slipped during the summer, but shares of Cedar Fair and Six Flags moved higher despite also posting lower guest counts.

Image source: Disney.

We're starting to see earnings reports trickle in from the operators behind some of the country's largest theme parks and regional amusement parks. Shares of Cedar Fair (FUN -0.11%) moved 4% higher yesterday -- bucking the market's downward trend -- after posting financial results for the seasonally beefy third quarter. 

It wasn't a blowout performance. Net revenue climbed less than 1% to $650.3 million, the product of a 1% increase in in-park guest per capita spending and a 5% uptick in out-of-park revenue narrowly offsetting a less-than-1% dip in attendance. Cedar Fair's profit of $3.10 per unit was ahead of last year's $2.92 showing, but well short of the $3.54 per unit that analysts were expecting. 

The miss isn't a surprise. Cedar Fair has fallen short on the bottom line in four of the past five quarters. The stock still moved higher on the report, as Cedar Fair's upbeat outlook was enough to warrant yet another increase to its already meaty quarterly distributions. Cedar Fair also issued an encouraging financial update through the end of October, where attendance through the first 10 months of the year are up a more encouraging 2%.

A week earlier it was Six Flags (SIX 2.25%) moving 5% higher after also posting a big earnings miss. Six Flags blamed its 2% downtick in turnstile clicks on crummy weather earlier in the season. Investors dismissed the summertime weakness at Six Flags and Cedar Fair, encouraged by robust season-pass sales and a future that includes more virtual reality at Six Flags and more on-site lodging capacity at Cedar Fair.

From amusement parks to theme parks

With Disney (DIS 1.27%) set to report quarterly results next week -- and theme parks being the the media giant's second-largest business -- it's easy to see why the market's reception to smaller attractions operators is noteworthy. Disney reported a 4% dip in attendance at its domestic theme parks in its previous quarter, and with Disney World attendance also down during the first quarter, it won't be a shock to see a third straight quarterly decline for the the summer season.

Revenue and segment operating profitability should still inch higher for Disney's theme parks and resorts division. Just as Cedar Fair has overcome a slight downturn in attendance by generating more revenue out of folks at its parks, Disney has been able to push through hearty price and hotel rate increases.

Disney doesn't need to see attendance grow to succeed, for now. We know that this won't be Disney World at its best in terms of guest counts. Florida theme park operators outside of Universal Orlando parent Comcast (CMCSA 0.54%) have struggled with traffic this year, and even Comcast may have proven mortal this summer.

Comcast's pro forma revenue grew 16% at its domestic theme parks during the third quarter. No one else is going to be posting double-digit growth on the top line, but Universal was helped by the springtime opening of The Wizarding World of Harry Potter at Universal Studios Hollywood and the summertime debut of the Sapphire Falls hotel at Universal Studios Orlando. Comcast has also been as aggressive as Disney (if not more so) with its hikes for one-day tickets and annual passes. Comcast didn't break out attendance at Universal Orlando this time, but it likely slowed from the big gains it had experienced in recent years after the Florida parks were treated to Potter-centric makeovers.

Disney will want to study the success that the amusement park operators already had this earnings season. Cedar Fair and Six Flags rose despite announcing lower attendance levels, defying gravity by spelling out the catalysts for improvement. Comcast stock moved lower after reporting its results, but there are a lot more moving parts at the cable giant than its NBCUniversal-owned theme parks.

It would be great if this is the quarter that Disney finally becomes more transparent about attendance figures, affording it the chance to spin the turnstile deficiencies in a favorable light. It worked for Cedar Fair yesterday and Six Flags last week. Let's see if it will do the trick for Disney next Thursday.

Rick Munarriz owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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