Investors were ready for SeaWorld Entertainment (SEAS 0.64%) to post its strongest growth in five years on Tuesday morning, and they got a whole lot more. Shares of the marine-life park operator are hitting 11-month highs after the company announced head-turning financial results.
Revenue soared 16.5% to $217.2 million in the first quarter, well ahead of the 6.5% uptick that analysts were targeting. SeaWorld's strongest top-line pop as a public company is primarily the handiwork of a 14.9% spike in attendance. Folks spent slightly less on average for admission, but the 1.7% decline there was more than offset by a 6.4% rise in per capita spending once inside the park. SeaWorld posted a loss -- the way that it typically does during the seasonally sleepy first quarter -- but it was a lot less red ink than Wall Street was modeling. It was a blowout quarter in nearly every sense, but let's move on from the good in the report so we can go over the bad and beautiful.
Image source: SeaWorld Entertainment.
The bad
The timing of the Easter holiday is a pretty big deal for theme park and amusement park operators. You may not think of thrill parks as a religious affair, but the timing of school holidays is everything for these attractions. Easter fell in April last year and March this time around, pushing those school holidays from the second quarter of last year into the first quarter this time around. Keep this in mind when the second quarter doesn't live up to this kind of momentum.
We saw this happen going the other way last year. Revenue fell 15.4% in the first quarter of 2017, as a March Easter in 2016 was too much for SeaWorld to overcome last year with the holiday slipping into the second quarter. Put another way, the $217.2 million in revenue it generated through the first three months of this year is actually less than the $220.2 million it rang up during the same period in 2016.
We also can't read too much into the first quarter because of the seasonality of this particular business. SeaWorld has just five of its 12 parks open during the entire quarter. This is historically SeaWorld's worst quarter. Attendance rising to 3.2 million during the first quarter is great, but this is actually just 15% of the 20.8 million guests it entertained through all of last year.
The beautiful
Tuesday morning's report may be more symbolic of a turnaround than financially meaningful, but it's hard to argue with momentum. The stock at Tuesday's high has skyrocketed 78% since bottoming out when it was buyout bait six months earlier.
The real test will come during the current quarter when the Easter tailwind of the first quarter becomes a headwind. PETA is calling this "one-off" report a "financial fluke," and that's a fair take on the surface. All three of the regional and theme park operators that have already posted first-quarter financials experienced double-digit percentage gains in revenue.
However, with SeaWorld still on track for cost-saving initiatives that will help improve its bottom line as a generally buoyant economy lifts attendance across all attractions this summer, do you really want to bet against the reborn market darling? With SeaWorld already emphasizing new rides over the controversial orca performances at its three namesake parks, this could be the beginning of a win-win turnaround.
