Bear of the Day: Six Flags (SIX)

Madeleine Johnson

Six Flags Entertainment (SIX) owns and operates regional theme parks, offering guests rides, water attractions, concerts, shows, restaurants, game venues and retail outlets. The company also holds long-term licenses for certain Warner Bros. and DC Comic characters like Bugs Bunny and Batman.

Shares Tumble After Disappointing Q3 Earnings

Last month, Six Flags reported underwhelming earnings for its fiscal 2019 third quarter. Q3 comprises its peak period too, so investors were doubly disappointed. Earnings of $2.11 per share lagged behind the Zacks Consensus Estimate of $2.30. Revenue managed to grow 1% year-over-year to $621.2 million, but fell well below what analysts were expecting.

Spending per guest was down 1% because of higher attendance from its Active Pass base, and revenue from sponsorships, accommodations, and international agreements dropped 26%. One bright note in the quarter was its membership program, however. Even though it pushed down per-guest spending, Q3’s attendance showed that Active Pass is boosting guest visit totals.

As a result, shares tumbled almost 12% after the report was released. And, SIX is down over 17% year-to-date.

Six Flags Entertainment Corporation New Price and Consensus

Analysts have since turned bearish on Six Flags, with nine cutting estimates in the last 60 days for the current fiscal year. The Zacks Consensus Estimate has dropped 16 cents during that same time period from $2.78 to $2.62 per share. This sentiment has stretched into 2020, and our consensus estimate has fallen 19 cents in the past two months.

SIX is now a Zacks Rank #5 (Strong Sell).

Looking Ahead

Management didn’t provide guidance in the earnings press release, but the fact that Six Flags struggled to generate meaningful growth in its key quarter—40% of revenue comes from the third quarter—may not be a great sign, especially as consumer spending is strong right now.

For those investors looking to add a consumer discretionary industry peer, they could consider Cedar Fair (FUN). The entertainment and amusement park company has seen gains of 18.3% in 2019.

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