For sports fans, the Madison Square Garden Company (NASDAQ:MSG) really shouldn’t need an introduction. The company was spun-off from Cablevision (NYSE:CVC) in 2010 and owns the NBA’s New York Knicks, the NHL’s New York Rangers, Madison Square Garden itself, and the MSG Network, among a variety of other entertainment assets.
Since the spin-off, the stock price has soared as a great deal of value was apparently unlocked as a stand-alone company. In fact, MSG has actually added more than 150% since its debut in 2010, easily crushing not only the S&P 500 index, but also its former parent company as well.
Yet while the stock has had a good run, turbulence has hit MSG lately, and particularly so after its recent earnings report. This most recent report actually marked the first time that MSG had missed estimates in more than two years, and given the size of the miss, it could suggest some more troubles are ahead for this company.
Recent Earnings & Outlook
In the most recent report, MSG was expected to earn 39 cents a share for the quarter. However, the company put up just 24 cents a share in earnings, a negative surprise of nearly 38.5%. This quarter may also be a bit unfavorable when compared to last year, thanks to some disappointing results from some of MSG’s assets (teams).
Last year, both of the New York-area teams made the playoffs for Hockey, while the Rangers aren’t looking too great to make it past the Conference Semifinals this year (at least at time of writing when they were down 3-1 to Pittsburgh). If this holds, MSG will have had less playoff hockey games to broadcast which can eat into revenues.
Even more troubling is the play of the Knicks, easily one of the most famous franchises in the NBA. Last year, the Knicks made it to the Conference Semifinals as well, while this year, they did not make the playoffs, their coach was fired, and there are rumors swirling that their top player will soon depart.
These situations look to make comps tough for MSG, and with the Knicks (arguably one of the key pieces of any MSG valuation) in turmoil, the longer term isn’t looking too favorable right now for the Madison Square Garden Company either. Thanks to this, analysts have been slashing their estimates for MSG stock, with not a single estimate going higher in the past 60 days.
Instead, the trend has been universally lower, pushing the consensus EPS for 2014 down from $1.84/share sixty days ago to $1.71/share today. Both the current quarter and next quarter have also seen their consensus estimates tumble by a few cents in just the past seven days too, so this move lower has been pretty recent by analysts.
It has also been enough to push MSG down to a Zacks Rank #5 (Strong Sell) suggesting that investors should look elsewhere until this once high-flying stock can turn around some of its key assets.
Unfortunately, the Leisure industry currently has a pretty poor rank overall as its Zacks Industry Rank is in the bottom 42% of all segments. There are, however, a few buys in the space if investors are looking for some other ways to play the broader sector.
In particular, one company that stands out is Cedar Fair (NYSE:FUN) the owner of theme parks such as Cedar Point in Ohio. This company has a Zacks Rank #2 and it is seeing strong earnings estimate revision activity for the full year, suggesting that investors might want to consider this FUN pick over MSG, at least while there is such a cloud of uncertainty looming over key pieces of MSG’s empire.