Cedar Fair - Getting It Right

| About: Cedar Fair, (FUN)

Two weeks ago I wrote:

And, for those wishing to participate in its 5% yield, the record date for the next distribution will be September 5th.

More importantly, if the company holds to past practices, investors can expect to see a press release around the same time announcing revenue and attendance figures. I expect that both these figures will be at record levels, driven by hot, dry weather, reasonable fuel prices and new premium packages.

Right on schedule, on September 5th, Cedar Fair, LP (NYSE:FUN) announced its revenue and attendance figures for its critical Summer season that ended Labor Day. The numbers were ahead of last year when the company was on its way to delivering a second consecutive record year and now appears to be well on its way to setting new highs. CEO Matt Ouimet said:

Based on the strength of our results through Labor Day and the positive momentum we have heading into our important fall season, we remain confident in our 2012 full-year revenue guidance of $1.055 billion to $1.075 billion and our Adjusted EBITDA guidance of $385 million to $395 million.

Revenue through Labor Day was $881 million, $40 million ahead of last year when the company went on to post full year revenue of $1.028 billion. Note that Ouimet stated "our important fall season." It has become an increasingly significant contributor to revenue as Cedar Fair has extended its season at many of its parks in recent years with popular Halloween themed events. It is also a risky time of year requiring good weather and co-operation from Mother Nature. This year, if revenues for the remainder of the year equal last year's performance, revenue would be just above the midpoint of the guidance.

A 1% increase in attendance has contributed to the company's 5% gain in revenue. However, when investors find out about Q3 results on November 6th, they are likely to hear that it was new programs, like Fast Lane and other premium offerings, that were very important drivers to the revenue growth.


Cedar Fair has been performing very well during Ouimet's first full year as CEO and investors should benefit from that performance. From the press release:

Ouimet also noted the company is on track to pay more than $2.00 per limited partnership unit in distributions in 2013, up from its current distribution rate of $1.60 per unit for 2012.

Based on Friday's closing price of $32.47, the current yield is 4.93% and the projected yield next year is more than 6.1%. Some investors will find Cedar Fair's yield too hard to ignore. Others will stay away, finding its debt load too great and leverage too risky.

While not nearly as bullish on the company as I was when I wrote about it in early June and the price was $25.55, I remain long and expect to add to my position in the next few weeks.

Disclosure: I am long FUN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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