The popularity of snow sports like skiing and snowboarding has significantly increased in recent years. This trend is poised to continue following last year's record-breaking snowfall and several expansions at multiple resorts this holiday season. With the advent of the winter, ski resorts across the state are churning out snow and preparing for the forthcoming 2023-24 holiday season.
Vail Resorts, Inc. (MTN), owning and operating 41 high-end resorts worldwide, has forged a robust foothold in the ski industry bolstered by its strategic locations and superior guest offerings. MTN demonstrates its substantial corporate strength with a market cap of $8.44 billion, thereby solidifying its stature within the buoyant business landscape.
The company is set to unveil the financial results for its fiscal first quarter 2024, which ended on October 31, 2023, after market close on Thursday, December 7, 2023. Analysts expect MTN’s revenue to decline 2.4% year-over-year to $272.89 million, while its EPS is projected to remain in the red at $4.63, plunging 36.2% year-over-year.
However, the fiscal 2024 forecast presented by MTN has seemingly piqued investor curiosity. The firm anticipates “meaningful growth” for the period, with a robust Resort EBITDA margin. Net income attributable to MTN is estimated to be between $316 million and $394 million, with Resort Reported EBITDA for fiscal 2024 between $912 million and $968 million.
Moving forward, several dynamic factors are poised to impact MTN's operational performance in the foreseeable future, requiring closer attention and analysis.
MTN agreed to acquire Switzerland's Crans-Montana Mountain Resort, marking its 42nd ski location and extending its global operations. This move is seen as the company's latest effort to increase its international appeal by boasting various outdoor activities complemented by breathtaking alpine views. The Crans-Montana deal signifies MTN's second Swiss ski acquisition within two years, having procured the Andermatt-Sedrun resort in 2022.
The new business deal demonstrates an 84% stake in the resort's lift operations and 80% ownership in a key ski school associated with the site, thus portraying the company's influential global reach and enhancing the allure of Crans-Montana Mountain Resort.
Cementing its dominance, MTN places the transaction value at CHF 118.5 million, signifying substantial potential for growth. Although immediate revenue generation from the acquisition is not expected, projections suggest that Crans-Montana will contribute approximately CHF 5 million EBITDA in its fiscal year ending July 31, 2025, marking its debut full year following the scheduled completion later in fiscal 2024.
MTN projects long-term EBITDA growth from the Alpine resort's incorporation into MTN’s Epic Pass offerings, synergies within the company's broader network, and investments geared toward enhancing guest experiences.
In line with its unwavering commitment to delivering superior guest experiences, the company has announced plans to roll out cutting-edge technology at its U.S.-based resorts for the 2023-24 ski season. The company places significant emphasis on bolstering offerings at its resorts, including the ongoing efforts to expand capacity through initiatives focused on lift facilities, ski terrain, technological advancements, and food and beverage options.
MTN closed its fiscal year on a subdued note. In the fiscal fourth quarter that ended July 31, 2023, its total net revenue stood at $269.77 million, up about 1% year-over-year, with the resort's net revenue reaching $269.67 million. Its loss from operations widened 63.2% year-over-year to $160.10 million.
Net loss attributable to MTN surged to 128.57 million, or $3.35 per share. These statistics are not unexpected, considering the large concentration of MTN's assets in the Northern Hemisphere, which experiences the summer season during the company's fiscal fourth quarter.
Diminished demand for mountain travel destinations and weather-related operational disruptions significantly affected the company's performance. Moreover, the ancillary business's underperformance and inflating costs further contributed to the decline.
Even though its revenue surged by an impressive 14.4% annually for the full year, expanding expenses have negatively impacted bottom-line figures.
As of July 31, 2023, its net debt increased to $2.26 billion, which was 2.7 times trailing-12-months total reported EBITDA. Considering the high-interest rate environment, the obligation of interest payments may significantly strain the company's financial health. With the company's EBITDA persistently trailing downward, managing such immense debt could be as challenging as delivering a hot soup on a unicycle.
MTN’s annualized dividend rate of $8.24 per share translates to a dividend yield of 3.72% on the current share price. Its four-year average yield is 2.07%. Its dividend payments have grown at CAGRs of 32% and 8.2% over the past three and five years, respectively.
Moreover, the stock has lost about 18% over the past three years and is trading below the 100- and 200-day moving averages. The stock could potentially rally amid favorable weather for the ski resort. Nevertheless, looming uncertainties are yet to be mitigated.
Investors may have to weigh their options carefully. Would it be prudent to embrace the risk for a dividend yield of 3.72% when the seemingly "risk-free" one-year US Treasury bonds offer a yield of over 5%?
Bottom Line
The post-pandemic travel surge is expected to maintain momentum through the upcoming holiday season. Driven by an amplified desire for relaxation and leisure activities, more and more American holidaymakers are drawing up travel plans.
Despite this positive trend, consumers and the tourism industry face price pressures as hotel rates climb an additional 0.8% higher in October than in 2022.
Today’s skiing culture exudes luxury, apparent through upscale shopping and gourmet dining experiences at the base of pristine, well-maintained slopes. Resort launches understandably hinge on financial backing and weather conditions beyond our control.
However, not even inflation and shifting climate can hinder the expansion of ski resorts or deter the passionate influx of visitors. Economic stability remains a concern amid rising inflation rates and continued geopolitical unrest. Despite these external factors, the ski property market persists in its resilience.
A look at MTN's financial metrics reveals that the company may struggle to leverage the positive industry trends. Considering these factors, it would be wise to wait for a better entry point in the stock.
