Vail Resorts Shares Valued Too High?

Jun. 6.12 | About: Vail Resorts, (MTN)

Shares of Vail Resorts (NYSE:MTN) traded up over 7% during Wednesday's trading session. The leading mountain resort chain reported third quarter earnings before the market opened. Shares sit at $47.00 and are now close to a 52-week high (currently $48.13).

Net revenue for the mountain segment increased .09% for the quarter to $354.6 million. Lodging revenue decreased to $48.3 million. Overall the resort revenue decreased to $408.6 million, from the previous year's $408.9 million. Net income was $79.6 million, an increase of 3.5%. Earnings per share were $2.17, an increase from last year's $2.08. By operating segment revenue broke down as:

  • Lift Ticket Revenue +.07%
  • Ski School Revenue +1.1%
  • Retail/Rental Revenue +1.3%
  • Dining Revenue -1.1%

Revenue per skier increased by 11.6% during the quarter, which helped offset a decrease in the number of skiers (by 9.8%) at Vail Resort's properties. The company also saw an increase of 12.8% in season pass revenue. Spring season pass sales for the 2012/2013 season are up 17% for the number sold and up 22% for the dollar value of the passes.

Visits for all regions were down:

  • Tahoe Resorts: -22.4%
  • Colorado: -8.9%
  • Beaver Creek: 0%

Vail Resorts third quarter earnings came with one of the company's worst winters ever. There was 50% less snowfall across all resorts, including 70% less snow in the company's main Colorado region in March.

One positive for the company is its growing presence in the Tahoe region. The company acquired a third Tahoe resort named Kirkwood. Last year the company acquired Northstar, which at the time was the second most visited Tahoe resort. With its acquisitions, Vail Resorts now has three resorts in Tahoe, including the two most visited.

Analysts on Yahoo Finance were calling for earnings of $2.20 per share for the quarter. The company's miss is a bad sign going forward, as the third quarter is the company's most profitable. The company saw increases across several business segments despite bad weather and a decrease in attendance at resorts.

I think shares are too highly valued at their current prices. Shares are approaching a 52-week high and are trading at a very high valuation for next year's expected $1.16 earnings per share.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.