I'm a kid at heart, so last week I took my family to Southern California to chase some coasters. After kicking the tires of the news Cars Land attraction at Disney's California Adventure, we ventured an hour north to Magic Mountain.
Our timing couldn't have been better. Despite the ridiculous heat wave, Six Flags (SIX +0.00%) had just opened a new coaster -- Full Throttle -- at Magic Mountain just a few days earlier.
Magic Mountain now has a record 18 roller coasters, two more than Cedar Fair's (FUN +0.00%) Cedar Point park in Ohio. The two seemed to be jockeying back and forth for the crown a few years ago, but Cedar Fair eventually figured that this wasn't an arms race worth battling.
Full Throttle is a pretty intense ride. Billed as the tallest and fastest looping coaster in the world, it clocks in at a scintillatingly brief 54 seconds, but that's because it uses three launches throughout the ride to get you through the 160-foot loop, sending you backwards out of a tunnel, and back to the station over the loop.
It was still a work in progress when we rode on Thursday and Friday of last week. The subdued tunnel soundtrack that was used when the ride opened earlier in the week was replaced by Ozzy Osbourne's "Crazy Train" by the time we got there. There was netting aboard the boarding platform on Thursday that housed an awning by Friday.
Six Flags knows that timing is everything in the amusement park industry. Magic Mountain is one of the few parks in the chain that is open year-round, but Cedar Fair and Six Flags live and die by the summer. With the economy showing signs of life and gas prices staying low, it's the perfect climate for regional amusement parks that largely attract locals.
The third quarter that began this week for both companies is huge. Both companies are expected to earn more during these next three months than they will for the entire year. In other words, both chains lose money during the balance of the year.
There's certainly plenty of room for upside here. Analysts see revenue at both operators growing a mere 5% this year. Given the high fixed costs of running an amusement park, even the slightest tick to the upside in revenue could result in a material windfall on the bottom line. That's big because Six Flags and Cedar Fair are compelling investments for income investors, yielding 5.1% and 6%, respectively. Material improvement in profitability should translate into even more generous payouts if the positive industry fundamentals play out this season.
Just like Magic Mountain's new coaster, Six Flags and Cedar Fair are hoping for more forward launches in the coming months.
