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What to Expect From SeaWorld (SEAS) This Earnings Season?

SeaWorld Entertainment, Inc. SEAS is scheduled to report third-quarter 2017 numbers on Nov 7, before the opening bell.

Last quarter, the company pulled off a positive earnings surprise of 251.61%. Prior to that, this Florida-based theme park and entertainment company delivered negative earnings surprises in the trailing three quarters.

Notably, the Zacks Consensus Estimate for third-quarter earnings is pegged at 79 cents, reflecting an increase of 2.6% over the prior-year quarter.
    
Generally, the second and the third quarters of each year are seasonally strong for SeaWorld. Therefore, the company expects the trend to continue in the to-be-reported quarter as it has come up with a robust lineup of products that include new rides and attractions. Meanwhile, SeaWorld is increasingly focusing on its marketing strategy to highlight brand attributes and new additions. All of these are expected to boost attendance in the quarter.

However, California, Texas and Florida markets continue to witness a fall in attendance. Even promotional offerings have not been able to arrest the decline in traffic trends.

Nevertheless, SeaWorld is making every possible effort to regain customers’ confidence. Evidently, it continues to organize consumer events to drive attendance. Additionally, extended hours at SeaWorld Parks, strategic season pass promotions and more such strategies are expected to offset the prevailing negatives to some extent and attract customers, thereby improving attendance.

The Zacks Consensus Estimate for attendance in the third quarter of 2017 is pegged at 7,961, up more than 30% sequentially but down 4.6% year over year.

We are optimistic about the company’s sincere efforts to control costs without harming efficiency and improve its financial standing through debt refinancing, which might help in improving margins in the to-be-reported quarter. The consensus estimate for third-quarter earnings is pegged at 79 cents, reflecting an increase of 2.6% over the prior-year quarter

In the meantime, SeaWorld’s total revenue per capita has been under pressure mostly due to lower attendance, especially from Latin American and the UK visitors. The company also believes that though Latin American visitation has been stabilizing, it will take a long time to return to its previous glorious levels. For the quarter, the consensus estimate for total revenue per capita is pegged at $57, down 1.7% year over year.

Furthermore, it has launched tactical pricing initiatives at several of its locations. Thus, though the combination of direct price increases and dynamic pricing initiatives may somewhat drive admissions per capita in the quarter, ticket product and park mix issues might hamper the same. The consensus estimate for admissions per capita is pegged at $34.38, down 2.7% on a year-over-year basis.

In fact, the consensus estimate for the quarter’s revenues is pegged at $455.3 million, reflecting a year over year decline of 6.2%.

Additionally, costs related to marketing and reputation campaigns as well as investments in new attractions might hurt profits in the third quarter.

Taking into account the headwinds, our quantitative model predicts that SeaWorld does not have the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

Zacks ESP: SeaWorld has an Earnings ESP of -2.11%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: SeaWorld carries a Zacks Rank #4 (Sell).

As it is we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Take-Two Interactive Software, Inc. TTWO has an Earnings ESP of +3.97% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Planet Fitness, Inc. PLNT has an Earnings ESP of +0.34% and a Zacks Rank #2 (Buy).
 
The Walt Disney Company DIS has an Earnings ESP of +1.37% and a Zacks Rank #3.

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Walt Disney Company (The) (DIS): Free Stock Analysis Report
 
Planet Fitness, Inc. (PLNT): Free Stock Analysis Report
 
SeaWorld Entertainment, Inc. (SEAS): Free Stock Analysis Report
 
Take-Two Interactive Software, Inc. (TTWO): Free Stock Analysis Report
 
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