Vail Resorts (NYSE:MTN) investors were confident heading into the ski resort operator's fourth-quarter report. That period includes the seasonally weak summer months in North America, so sales and profits weren't likely to deviate much from the projection CEO Rob Katz and his team issued back in July.
But the report was still packed with important information for shareholders -- including updated season pass sales -- and below we'll take a look at few of those key trends.
Hitting the mark
Sales landed at $244 million, representing a 15% increase over the prior year and a slight outperformance when compared to management's July guidance. Vail saw higher demand in both its mountain and lodging services, which benefited from a growing base of properties around the world.
The performance allowed the consumer discretionary stock to meet management's full-year target of roughly $700 million of adjusted annual earnings even though the start to the peak ski season was affected by weather disruptions.
"After the challenging early season period," Katz said in a press release, "our results for the remainder of the year were largely in line with our original expectations." Vail noted sluggishness throughout the year in demand from international visitors to its properties in the U.S. and Canada, but this was more than offset by increased local demand and better ski conditions. The company's earnings haul and profitability each slightly underperformed initial targets, but the year progressed as expected following a weak early season start.
Season pass sales
The upcoming peak ski season, which begins in late December in North America and runs through the winter months, is looking strong. Season pass sales are up 14% in terms of volume and higher by a bit more in terms of total revenue, implying slightly higher average prices. Many of the standout resorts attracting heavy bookings are in Vail's northeastern U.S. properties, and that success is demonstrating progress in the company's strategy to spread out its geographic footprint.
The marketing department is finding it easy to sell passes to the recently acquired Whistler Blackcomb property, in part thanks to all the capital investment upgrades Vail has made since it purchased the resort. "We are very pleased with the performance of our pass sales effort to date," Katz explained, "especially given the increased size and scale of the program."
Looking to the 2020 season
Management's official 2020 outlook calls for adjusted earnings to range between $776 million and $822 million. At the midpoint, that guidance translates into another 14% increase compared to the prior year's profit haul.
That wide range reflects the considerable risk involved in predicting the actual weather during the peak winter months in late 2019 and early 2020. Even with Vail's bigger resort footprint, much of its earnings performance will depend on favorable ski conditions in the western U.S. and Canada.
The good news is that the company has reduced one part of that risk by installing snow-making machines in several mountains. Those upgrades should protect against the type of weak early-season visitation numbers that affected results in last year's second quarter. Ideally, that setup should give the business robust momentum heading into what's likely to be a record earnings year for Vail Resorts.