Looking at the numbers specifically, net revenue through July 8 was approximately $563 mln, down 2% from the year ago period. Consequently, the company issued downside revenue guidance for the year, projecting $1.34-$1.38 bln versus the $1.39 bln consensus. The primary issue was that park attendance in the period fell by 3%, or 314,000 visitors, to about 11.1 mln guests. Virtually all of the company’s revenues from its seasonal amusement and water parks derive from high-traffic summer weather operating periods beginning in May and peaking during July and August vacations; California-situated Knott’s Berry Farm is the only Cedar Fair park open year-round.
While FUN isn't considered a high growth stock, its top-line growth rates had picked up appreciably over the past couple of quarters. In 4Q17, revenue growth hit 19%, which was followed up by a 13% increase last quarter. Looking at its FY18 revenue guidance, however, that would equate to growth of just 3% at the mid-point for the year. So, FUN is clearly not expecting the stronger top-line growth to continue through the year, which is discouraging to investors who believed brighter days were ahead in terms of growth.
As a result of the dip in attendance, as well as some labor cost pressure, FUN commented that it has dealt with some early-season margin compression. While FUN didn't issue earnings guidance, it did provide its outlook for Adj. EBITDA, seeing $475-$495 mln for the year. At the mid-point, this would equate to year/year growth of about 1%.
On the positive side, out-of-park customer spending increased by 3% due to solid demand at its resort properties, particularly at its Cedar Point property in Ohio. On that note, the company recently opened a new 158-room tower at Hotel Breakers at Cedar Point. Additionally, FUN is opening new hotels adjacent to its Carowinds property in North Carolina (late 2019) and at Canada's Wonderland near Toronto (2020).
What FUN also has going for it is its very generous dividend, currently yielding nearly 5.5%. In the press release this morning, management stated that it remains committed to a steady 4% annual increase to its distribution going forward. That should be supportive to the stock and limit the downside risk as income-oriented investors look to take advantage of the higher yield.
Overall, the downside revenue guidance comes as a disappointment following back-to-back quarters of double-digit topline growth. But the company is profitable and pays a generous distribution, which should help keep a lid on the downside pressure.