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International Speedway (ISCA) reported stronger-than-expected results for its second quarter June 5. The racetrack owner, which owns 13 tracks throughout the United States, earned $0.52 per share versus the $0.40 the Street was expecting, an increase of 100% year-over-year. Revenues grew 29% compared to the same quarter last year and exceeded expectations by $20 million.

The firm has seen revenue tumble over the last five years, as its middle and working class consumers continue to feel the repercussions of the Great Recession. We think year-over-year top-line acceleration is telling of the improvement we are witnessing in the domestic economic environment. Net admissions grew 25% from the same period last year, as the firm is driving better attendance at its raceways. Its motorsport-related revenues, which include TV royalties, licensing, parking, and racetrack rentals also continue to grow, advancing 32% compared to a year ago.

The firm's main sport, NASCAR, has suffered over the past few years, but it appears to be getting back on track. In addition to a squeezed consumer base, recent NASCAR races and seasons (to a large extent) have not been very competitive, which, in our view, is a necessity to keep fans coming back to the races in droves. For example, the NFL and NBA-- two sports with several measures to ensure competitiveness--have grown in popularity during the same, while MLB has suffered from competitive imbalance (similar to NASCAR), where a few top teams have dominated.

To illustrate this point, driver Jimmie Johnson has won five years in a row, from 2005 to 2010, and Tony Stewart was victorious in 2004 and 2011. This year, Matt Kenseth, who last won in 2003, and the popular Dale Earnhardt Jr. are in first and second place, respectively. Earnhardt Jr. recently won his first race since 2008, which could reignite some of his fan base.

We think the fortunes of International Speedway and NASCAR are tied at the hip, so if NASCAR is able to regain some of its popularity, International Speedway will be able to grow earnings and revenue across all categories. We like the firm's business model due to its significant operating leverage, but we are unsure if NASCAR will be able to reclaim the same level of popularity it had in the mid-2000's. Still, we continue to watch the firm closely for addition to our Best Ideas portfolio at the right price.

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

Source: International Speedway May Be Mounting A Comeback