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Vail Resorts Lets It Snow

By Dan Caplinger - Jun 7, 2019 at 9:47AM

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A long winter meant great financial performance for the ski resort operator.

When the weather outside is frightful, investors in Vail Resorts (MTN -0.03%) dream about raking in extra profits. Unlike a host of retail companies that have bemoaned the tough winter and wet spring that have covered much of the U.S., Vail has benefited from a long ski season that has helped drive extra traffic to the company's resorts. After several years of subpar winters, the more favorable conditions in the 2018-2019 ski season have come as welcome news for snow-sports fans and investors alike.

Coming into Thursday's fiscal third-quarter financial report, Vail Resorts investors fully anticipated that the quarter's results would be better than they've seen in a while. Yet Vail's numbers proved even better than many had hoped, and early signs suggest that moves to boost business for next season are paying off for the company.

Red tram going up a cable along a mountainside covered in trees, with snowy peaks in background.

Image source: Vail Resorts.

Vail rakes it in

Vail Resorts' fiscal third-quarter results revealed an avalanche of cash coming in during the company's key part of the season. Total revenue of $958 million was up 13% from year-ago levels, and that was almost exactly what optimistic investors had expected to see from the ski resort operator. Net income rose 14% year over year to $292.1 million, and the resulting earnings of $7.12 per share topped the consensus forecast of $7.06 per share among those following the stock.

Vail saw solid performance across the board. The key lift revenue number was up more than 16%, as the company cited both stronger pass sales coming into the season and greater attendance by visitors without passes. Smaller contributors to growth included the company's ski schools, which saw a 9% boost in sales, and the retail and equipment rental category, which experienced a nearly 10% revenue increase. Those numbers helped produce a 14% rise in adjusted pre-tax operating earnings for the mountain segment, which also benefited from the acquisitions of the Triple Peaks and Stevens Pass resorts.

Lodging showed even better performance. Net revenue for the segment was higher by 17%, thanks largely to Triple Peaks as well as some new lodging properties in the Tahoe area that Vail didn't manage in the previous year. Park City also did well for the segment, and although average daily rates were slightly lower than year-ago levels, adjusted pre-tax operating income for the division was up by more than 20% during the period.

CEO Rob Katz described the benefit the weather had on Vail's results. "Our Colorado, Utah, and Tahoe resorts experienced strong local and destination visitation throughout the third fiscal quarter," Katz said, "supported by favorable conditions across the western U.S., which also allowed for an extension of the ski season for select resorts in Colorado and Tahoe." Katz did point out that Whistler Blackcomb in British Columbia saw relative weakness in international visits, but the rest of Vail's operations were able to pick up the slack.

What's ahead for Vail?

Vail was excited about the influence that the strong finish to the season had on its expected full-year numbers for fiscal 2019. The resort operator narrowed its profit guidance, with the midpoint of its new range of $277 million to $297 million in net income rising by $3 million from its previous projections. That's still less than Vail had expected coming into the season last year, but it nevertheless showed that the company has benefited from skiers returning to the slopes.

More importantly, Vail's progress in selling season passes for the 2019-2020 ski season looks quite promising. Pass sales through the end of May included a 9% rise in units sold, translating to 13% greater revenue from those sales. In particular, Vail pointed to the expansion of its resort network in the northeastern U.S., which now includes Stowe, Okemo, and Mount Sunapee in the company's Epic pass lineup. Moreover, new alliances with the Sun Valley resort in Idaho and Japan's Hakuba Valley will make the Epic pass even more attractive to snow-sports enthusiasts.

Vail Resorts investors were happy about the late-season performance, and the stock climbed almost 7% in after-hours trading following the announcement. With strong momentum heading into the slower summer months, Vail looks well positioned to take advantage of favorable conditions as long as they last.

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