It's Not All Downhill at Vail Resorts

06/30/2020 5:00 am EST

Focus: CONSUMER

Ian Wyatt

Publisher & Chief Investment Strategist, Wyatt Investment Research

Some travel-related companies have the financial resources to survive this slump — and one of those companies is Vail Resorts (MTN), suggests Ian Wyatt, growth stock expert and editor of Million Dollar Portfolio.

Vail operates 37 mountain resorts and regional ski areas around the world, allowing skiers to visit for the day or a week, or purchase annual season passes.

The 2019-2020 ski season was understandably cut short when the resorts closed on March 15 in response to the pandemic. Vail’s revenue fell from $958 million in the year-earlier quarter to $694 million, which was no surprise. Actually, the drop wasn’t nearly as bad as the market expected.

Net income totaled $152.5 million, less than half of the $292.1 million the company earned last year. Again, no huge surprise there. This quarter’s income works out to adjusted earnings per share of $4.29, well ahead of the consensus expectation of $2.96.

When it comes to travel companies, Vail is uniquely able to survive this crisis. The most obvious advantage is that skiing is an outdoor sport, allowing people to spread out.

The company is also cash-heavy, with more than $480 million on its balance sheet. That’s plenty of dry powder to see it through the next couple of quarters when business is certain to be slower than usual.

It’s also plenty to work out deals to purchase additional properties that might not be weathering this business climate as well as Vail.

Based on this latest earnings report, the current price implies the markets are expecting full-year earnings to be down by about a third compared to last year, which seems like a fair assumption to me. I actually don’t look for earnings to be down quite that much.

I also believe the shares are attractive from a value perspective. So, I’m taking advantage of the dip in Vail’s shares. Buy up to $200.

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