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Vail Resorts Boosts Guidance, Raises Dividend

By Dan Caplinger – Mar 10, 2016 at 5:36PM

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The ski-resort company posted solid results in its key early-winter quarter.

Image: Vail Resorts, Jack Affleck.

This time of year is the most important for ski resort specialist Vail Resorts (MTN -0.90%) because of its huge exposure to the unpredictability of winter weather. Even though the company acquired the Perisher resort in Australia to give it some Southern Hemisphere balance, Vail Resorts still has most of its resorts in the middle of their winter seasons right now, and coming into Thursday's fiscal second-quarter financial report, Vail Resorts investors were looking for solid revenue growth but slight decreases in earnings. The company managed to defy the downbeat part of those projections, enjoying a modest rise on the bottom line. Let's take a closer look at the latest from Vail Resorts and what it means for the future.

Vail Resorts says let it snow
Vail Resorts' fiscal second-quarter results gave investors what they wanted to see. Revenue jumped 13% to $599.4 million, which was better than the roughly 10% growth rate that investors had expected. Net income was up about 1% to $117 million, and that resulted in earnings of $3.14 per share, which was $0.14 better than the consensus forecast among investors.

Looking more closely at Vail's various segments, the Mountain business saw its revenue climb 15%, and a slower rate of operating expense increases left the segment's operating margins looking more attractive than they did last year. Most of the gains came from the lift revenue area, but higher sales in the ski school and retail and rental businesses also contributed to overall gains. Overall, Vail's Reported EBITDA figure for the Mountain division was up nearly 22% from the year-ago quarter.

The Lodging segment posted more modest gains of 6% on the quarter's revenue. Occuprancy rates climbed nearly four percentage points, and an almost 10% rise in revenue per available room showed considerable strength. The real-estate segment saw revenue drop by more than half, but Reported EBITDA for the segment reversed a year-ago loss to produce a modest profit.

CEO Rob Katz was pleased with Vail's performance. "The Tahoe market has seen a significant rebound in visitation this year," Katz said, "and we are pleased with the double-digit visitation and revenue growth at Park City." International visits declined somewhat, but conditions have improved over the past couple of months.

What's ahead for Vail Resorts?
Vail Resorts also discussed some ambitious plans for capital improvements. The biggest move will come at Wilmot Mountain, which is 65 miles north of Chicago and was acquired in January. Vail expects to invest in modernized dining and entertainment options as well as new lifts and upgrades to enhance capacity and increase snowmaking capabilities. In addition, new restaurants at the top of one of its chairlifts in Breckenridge and a chairlift upgrade at Vail Mountain should help improve the customer experience at other resorts as well.

Vail's guidance for fiscal 2016 included an update in its overall projections for resort-reported EBITDA, which it now believes will be between $430 million and $445 million. Net income should come in between $132 million and $152 million, which is also higher than previous forecasts.

Vail also rewarded its investors, boosting its dividend by 30%. The company will now pay $0.81 per share quarterly, and that will bring the stock's yield above the 2.5% mark.

Vail Resorts stock opened higher immediately following the news, but by the end of the day, the stock had fallen back by 4%. Nevertheless, things appear to be going well at Vail, and with ambitious plans for growth and improvements throughout its existing network, investors can expect more good times ahead for Vail Resorts even once winter ends.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Vail Resorts. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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