Vail Resorts Earnings Preview: What to Watch

The peak ski season has come and gone, but that doesn’t mean investors aren’t eager for an update on Vail Resorts(NYSE: MTN) operating trends. After all, the resort giant is in the middle of its biggest capital investment push yet, and spending there will determine just how valuable its recent property acquisitions become over the long term.

Additionally, Vail’s season pass numbers should provide tantalizing hints about how lodging and ski trends might recover this year following an unusually weak 2017 winter season.

With that bigger picture in mind, let’s take a closer look at what investors can expect to hear from Vail on Thursday, June 7.

Image source: Getty Images.

Diversity and season pass trends

Vail’s fiscal second-quarter results included most of the peak ski season, and the numbers were impacted by dramatically lower snowfall than investors have seen in the past. In fact, snowfall was down 55% during the period in key resorts including Vail, Beaver Creek, and Park City.

The good news is revenue held steady despite that volatile weather shift. Vail investors can thank the company’s improved geographic diversity for that steady result. While essentially all of its ski visits in fiscal 2012 occurred in Colorado and around Lake Tahoe, today Vail books significant business in places like British Columbia and Australia.

Thus, look for key metrics like lift revenue, ski school sales, and lodging to hold up well this quarter despite the fact that ski visits had been trending down in the core U.S. market by 5% through early March.

CEO Rob Katz should provide updates on season pass trends on Thursday. This is another area that has been critical to Vail’s improving business results lately. More pass sales are good because they smooth out the impact from weather volatility and give management more visibility into future customer traffic.

That’s why Vail is aggressively marketing these passes to prior guests and to new potential visitors. Ultimately, management is hoping that they can improve on last year’s 78,000 unit sale increase, and investors will find out whether sales trends are supporting that goal. It would be even better news for the business if the company can boost its average prices at the same time.

Spending money to make money

The $150 million that Vail expects to plow into its business this year marks its biggest commitment yet to this category and is nearly 50% above last year’s spending. The highlight of that capital program will be $40 million spent on upgrading two lifts at the Whistler Blackcomb property and the addition of a new gondola at the same resort. Combined, the projects should increase capacity by 43% at Whistler while improving the guest experience.

Meanwhile, Vail is expanding its warmer weather mountain offerings so that, with attractions like Jeep tours, hiking, and zip line experiences, its can keep parts of its resorts populated outside of the peak winter months. With summer on the way, look for executives to spend some time discussing their plans for these attractions.

Katz and his team can’t control the weather, and so Vail’s business will always have a degree of volatility that isn’t present at other entertainment or vacation venues. But the company is doing what it can to smooth out the seasonality of its business while making the capital investments that should keep customer satisfaction — and ski visits — rising over the long term.

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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Vail Resorts. The Motley Fool has a disclosure policy.

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