SeaWorld Entertainment Inc. shares surged 18% Monday, putting them on track for a four-year high, after the theme park operator posted better-than-expected earnings for the second quarter and said attendance is rising again.
SeaWorld, which struggled for years after the 2013 release of the “Blackfish” documentary that alleged cruelty in its handling of orcas, is starting to look more like a Six Flags Entertainment Corp SIX, +1.45% theme park, which is driving up attendance and revenue, experts said.
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SeaWorld SEAS, +18.03% reported second-quarter revenue of $391.9 million, up from $373.8 million last year and ahead of the $371.0 million FactSet consensus. Attendance was also up nearly 5% to 6.4 million guests.
“The results were driven by our new strategic pricing strategies, new marketing and communications initiatives and the positive reception of our new rides, attractions and events,” said John Reilly, SeaWorld’s interim chief executive, in a release. “In addition, we continued to experience a double-digit increase in season pass sales revenue and an increase in total revenue per capita driven by a 6.5% increase in in-park per capita spending.”
On the Monday morning earnings call, Reilly was confident that the company could attract customers it lost amid the animal welfare scandal.
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“[W]ith regard to attendance, we believe we can do better than the assumed 1% [industry growth] and recapture that 20% to 25% of what we’ve lost over the past few years,” he said, according to a FactSet transcript.
Aside from the developments outlined in Reilly’s release comment, the CEO discussed new rides that have launched so far in 2018, including the Electric Eel at SeaWorld San Diego.
“The cloud of bad PR still looms, but it’s starting to break as the park continues to invest in assets outside the whales,” said John Poelking, leisure and media analyst at Mintel. “New rides and educational experiences have repositioned SeaWorld as a fun place to go to again, and people appear to be responding to the sustained efforts of the brand to try something new.
The company’s pricing strategy has also helped establish the park as offering greater value than its competitors, he said.
SeaWorld’s focus on pricing comes after Walt Disney Co. DIS, +2.16% increased the price for admission to parks in Florida and California earlier this year, with Disneyland tickets now costing up to $135 and Disney World tickets priced at up to $129.
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A single-park ticket to SeaWorld Orlando with all-day dining costs up to $109.99, with a discount for one-day advance purchase, according to the website. Other parks include Busch Gardens Tampa Bay and Adventure Island.
In San Diego, a single-park ticket for any day of the week is about $60.
“SeaWorld is starting to act more like a regional theme park like Six Flags SIX, +1.45% rather than a destination such as Disney or Universal,” said Poelking.
Still, animal-rights activists said the company is not out of the woods yet. People for the Ethical Treatment of Animals, or PETA, continued its campaign against SeaWorld, warning that “shareholders should be wary” about the continued practices at the theme park.
“PETA polls people outside SeaWorld parks every day, and we find that many mistakenly believe that all breeding has now stopped and bought tickets thinking that conditions had somehow improved for the animals there, not realizing that orcas are still being forced to perform the same tricks in the same tiny concrete tanks—and that other dolphins and whales are still being impregnated, sometimes forcibly after being drugged,” PETA’s Executive Vice President Tracy Reiman said in a statement.
“We find that many families who recently went to SeaWorld say they’ll never go back after what they saw.”
SeaWorld disclosed Monday that it has set aside $4 million in provisions for a proposed settlement with the Securities and Exchange Commission, which had subpoenaed the company regarding comments made by executives in 2014 about “Blackfish.”
But SeaWorld is bullish, setting a goal of $475 million to $500 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) by the end of 2020.
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“[W]e find the long-range target -- for growth we have never before seen in a public theme park company -- surprisingly bold,” wrote B. Riley analysts led by Barton Crockett in a Monday note. “However, with largely fixed costs, a little revenue growth in a theme park can largely drop to the bottom line. And major shareholder/director Hillpath has had a vision of $500 million EBITDA since moving into a major investment and board position over the last several months.”
B. Riley rates SeaWorld shares as neutral with a $17 price target, which is about 32% below its current trading level.
SeaWorld shares have soared 85% for the year so far, outpacing the S&P 500 index SPX, +0.37% which is up 6.6% for the period. It is still about 44% below its trading level before the “Blackfish” release.
