This week, International Speedway
Results were boosted by substantial corporate sponsorship for the 50th running of the Daytona 500. More than 40 brands were involved and spent $100 million for this big anniversary. Among them was supermarket Kroger
Although this was a one-time event, it does demonstrate the commitment many companies are making to promote their brands through motor sports. For instance, the company announced a 10-year sponsorship agreement with, of all groups, the Southern California member of AAA. That group got the naming rights to International Speedway's Southern California racetrack and promptly renamed it to the exciting Auto Club Speedway of Southern California.
Race fans follow their sport fervently even when they aren't at the track. The television broadcast agreements have provided a lucrative, solid, and visible base for projecting financial results. In total, International Speedway says 75% of its earnings guidance for this year is contracted through television or other agreements.
Although fan loyalty and passion serve as strong longer-term drivers for the company, International Speedway cannot ignore that a good chunk of its revenue comes from discretionary spending. As people tighten their belts, the company has experienced a slowdown in advanced ticket sales. According to management, cautious fans are delaying their purchases until closer to race days.
Even so, the company left alone its $3.05 to $3.15 full-year earnings-per-share guidance for 2008 but feels "more comfortable" at the lower end. Investors can only hope it will stay "comfortable" and not have to cut that forecast. Its forward price-to-earnings ratio of about 13 might reflect investors' willingness to pay a bit more for better returns on capital and equity versus competitors such as Speedway Motorsports
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