Six Flags Falls After Late-Night Release Can't Hide Weak Earnings

(Bloomberg) -- It’s usually not a good sign when financial results come at 11:00 p.m., says Stifel analyst Steven Wieczynski.

He’s referring to Six Flags Entertainment Corp. The amusement-park operator released its disappointing third-quarter results an hour before midnight versus last quarter’s 6:00 a.m. release, 4:35 p.m. the quarter before that, and 7:00 a.m. in the 3Q and 4Q of 2017.

Wieczynski expected the stock to open “significantly lower,” according to a pre-open research note, pointing out that the softer-than-expected quarter was driven by attendance levels below expectations and higher operating costs. He was right. The shares sank as much as 15 percent as of 2:45 p.m., their biggest intraday drop ever. Six Flags is now trading at the lowest in 13 months.

Attendance growth of 5 percent year-over-year was 3 percent below Stifel’s estimate. And with management not commenting on organic attendance growth last quarter, Wieczynski thinks these results "will continue to bring concerns into play around what attendance looks like without acquisitions."

In addition, park-level results will bring into light "some investors’ concerns over the health of the core regional theme park consumer that has materialized over the past couple of months."

Another area of concern is the fact that management didn’t comment on its path “toward achieving its aspirational goal of $750 million in modified Ebitda by 2020.” And lastly, the 8 percent increase in deferred revenue may disappoint some investors.

“While we are clearly disappointed in these results, we don’t want to jump to conclusions and panic without hearing from management and getting some answers to outstanding questions we have,” Wieczynski says.

Six Flags is rated buy at Stifel, with a price target of $78. The company has a total of 7 buys, 3 holds, and 1 sell, with an average 12-month price target of $73, based on 10 estimates, according to Bloomberg data. Shares of amusement-park operator peers including Cedar Fair LP and SeaWorld Entertainment Inc. are also lower. Cedar Fair reports quarterly results Oct. 30, followed by SeaWorld on Nov. 5

To contact the reporter on this story: Janet Freund in New York at jfreund11@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Brad Olesen

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