SeaWorld Entertainment (SEAS) announced its financial results for the historically potent summer season on Thursday morning. Like folks sitting in the first few rows of one of its throwback killer whale shows, the report was all wet. Revenue plummeted 78% for the third quarter, and a year-ago profit was replaced by a larger-than-expected loss.
The lack of earnings and the sharp top-line drop may seem problematic, but it's par for the course in an industry that faces a long turnaround. Investors have accepted that this is how things are in the new normal, and SeaWorld stock has actually more than tripled since bottoming out in the middle of March. With Comcast (CMCSA -0.37%) posting similar results last week -- and industry bellwether Walt Disney (DIS 0.18%) likely to follow suit next week -- it's a bad time for the theme park operators, but as bad as things may seem, they could always be worse.
Image source: SeaWorld Entertainment.
Splash zone
Just 1.6 million guests walked through a SeaWorld turnstile during the third quarter, a brutal 81% plunge from a year earlier. If you noticed revenue holding up better than the guest count, you've figured why this report wasn't so bad after all. SeaWorld is generating more revenue on every guest. Per capita revenue rose 16.5% to $67.94 during the period, as a 22% increase in average admission and 9% uptick in what the typical guest spent once inside the park combined to make every visitor more valuable than last summer.
This is a surprising and ultimately refreshing revelation. Despite concerns that mask requirements and other social-distancing measures would find guests tiring of a day at the park faster than before, they're still willing to pay more to get in and spend more during the time that they are there. With travel restrictions in place worldwide, another argument here is that SeaWorld, Comcast's Universal Orlando, and Disney World would have to lean more on locals that don't typically spend money on food and trinkets the way that that out-of-towners do. SeaWorld's average guest going from spending $25.31 at the park last summer to $27.55 this time around shows that locals can appreciate the escape from reality.
Comcast and Disney won't report theme park metrics with the same kind of granularity as SeaWorld Entertainment, and they don't have to. Comcast and Disney are massive media stocks, and they have other more pandemic-proof endeavors to keep money rolling in. Revenue declined just 5% for Comcast -- with a profit -- in last week's quarterly report despite an 81% drop in theme park revenue. Disney will also have its media networks and Disney+ segments eat into the large shortfall at its gated attractions, but in that case it won't likely be enough to save it from posting a quarterly deficit.
There are glimmers of hope despite the scary headline numbers. SeaWorld is doing a lot of things right, and it's scoring points by taking chances that Disney and Comcast are avoiding right now. SeaWorld -- like the industry itself -- is just starting to get its sea legs back, and that's OK with park operators shifting their once-promising new rides for 2020 into next year. The stocks have bounced back before the fundamentals, but that doesn't mean that they're not compelling buys for enthusiasts and investors that see things trending in the right direction beneath the surface.
