Winter has been harsh throughout the eastern U.S., but for companies that focus on winter as their high season, heavy snowfall can be a ticket to big profits. Mother Nature wasn't entirely kind to ski resort operator Vail Resorts (NYSE:MTN), though, as snowfall figures in certain areas of the West were near record lows. Coming into Thursday morning's fiscal-second-quarter financial report, Vail Resorts investors weren't sure how much growth to expect from the resort operator, but in the end, solid performance in Colorado was enough to produce impressive profit gains and lead the company to reward its shareholders with a huge dividend increase. Let's take a closer look at Vail Resorts' results and what the company expects for the remainder of 2015.
Vail Resorts: "Let it snow!"
Vail Resorts' primary numbers showed mixed results compared to what most investors were expecting to see from the ski specialist. Revenue climbed 17% to $530.2 million, which was just slightly less than the $533.8 million consensus projection among those following the stock. On the net income front, though, Vail Resorts saw profits soar 95% to $115.8 million, equating to earnings of $3.10 per share. Even after adjusting for a large one-time income-tax benefit following an IRS settlement, adjusted earnings of around $2.46 per share were quite a bit higher than the $2.30 per share that investors expected.
Vail Resorts' various divisions all showed solid growth. In the mountain segment, total lift revenue climbed 22.5%, with big gains in non-season-ticket sales and the addition of its Park City resort helping to drive results. Ski school revenue rose 22%, and sales from dining and retail sales and rentals also posted double-digit percentage gains. In the lodging segment, revenue climbed 6.3%, with rising daily rates helping to contribute to a nearly 16% jump in revenue per available room. Vail Resorts' real-estate segment saw sales soar more than 60%.
CEO Rob Katz celebrated the company's impressive results in light of what has been a challenging season in some respects. The Tahoe region has experienced very poor snowfall totals, even as areas like Colorado have done well. "Despite varied weather conditions across our three primary regions," Katz said, "results this fiscal quarter demonstrate the benefit of our geographic diversification and the impact of our destination marketing strategies."
What's in store for Vail Resorts?
Moreover, the past couple of months have continued favorable trends at Vail Resorts. Through early March, Vail Resorts had seen total lift revenue climb 8% from the previous year, with spending on other related services climbing despite a slight drop in total skier visits. Vail Resorts' update of its guidance for the full 2015 fiscal year reflected these and other trends, with the company now expecting $340 million to $350 million of resort-related operating earnings despite an estimated $37 million shortfall in sales due to Tahoe's woes. Net income should come in between $109 million and $127 million for the year, which is consistent with what most investors expect.
The good and unexpected news for Vail Resorts shareholders came from a huge dividend increase. The company said it would boost its dividend by 50%, with quarterly payments to rise to $0.6225 per share beginning in April. That increase will take Vail Resorts' dividend yield up to almost 3% and reflects the ski specialist's expectations that the acquisition of Park City should continue to add enough profit to finance the higher payout.
Vail Resorts also expects its new Utah property to open up a huge opportunity in the coming year. As part of its capital plan, Vail Resorts will spend about $50 million to connect Park City to its Canyons resort, creating the largest U.S. ski resort measured in acres of skiable area. The company will also spend $60 million to $65 million on other projects, including improvements to Vail and Beaver Creek, where the recent 2015 World Alpine Ski Championships took place and drew attention to the popular ski area.
Even after an epic winter in the eastern U.S., Vail Resorts managed to navigate very different conditions in the western part of the country to produce impressive results. As the end of the high season for Vail Resorts approaches, shareholders will be able to celebrate higher dividend payments, but they'll also want to keep their eyes open for what the company does to enhance its prospects during the off-season. By setting the stage for growth now, Vail Resorts could see even bigger gains next winter.