What's Next For SeaWorld?

After SeaWorld Entertainment Inc SEAS reported a narrower-than-expected loss for the first quarter last Thursday, Credit Suisse issued a report reiterating its Outperform rating and $27 price target on the stock.

A Strong Quarter

Last Week, SeaWorld reported adjusted EBITDA of ($4 million), way above the Credit Suisse’s estimate of ($18 million). The analysts highlight, that the company’s management seems to be making good progress with cost reductions, as total opex stood well below expectations “despite attendance improvements which should theoretically make this more difficult.” Attendance increased approximately 6 percent year-over-year, better than the firm’s 1 percent heading into the print.

On The Right Path

While the analysts believe management is “on the right path to fix the company structurally, attendance growth was aided by promotional spend (driving a lower than anticipated ETP) and a favorable calendar (although timing of spring break was minor in our view and should not impact 2Q). Further, early season commentary as well as the deferred revenue build (+5% YoY) paint a good picture for the rest of 2015.”

Importantly, they like the management's decision to bring in more “thrill” rides at its SeaWorld parks, which should eventually differentiate the park and increase the margin profile. It should be noted that SeaWorld will introduce the largest roller coaster in Orlando in 2016.

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