New Rides And Attractions Will Boost Attendance In 2025

Key Takeaways

• Innovative rides and attractions, along with marketing optimization, are designed to enhance attendance and revenue growth.
  
• International expansion and cost reduction efforts aim to improve margins while share buybacks indicate strong cash flow confidence.
  
• Unpredictable climate disruptions and competition from new parks challenge United Parks & Resorts, while missteps in strategy and recovery could impact attendance and financial performance.

Catalysts

Operates as a theme park and entertainment company in the United States.

• The introduction of new, one-of-a-kind rides and attractions along with improved in-park venues and offerings in 2025 is expected to drive increased attendance and revenue growth.
  
• The company's focus on optimizing marketing effectiveness, including growing awareness and increasing conversion rates, aims to boost attendance and revenue.
  
• Strategic initiatives such as international expansion, IP partnerships, and sponsorships are expected to generate additional high-margin revenue, positively impacting earnings.
  
• Cost efficiency and reduction initiatives totaling $75 million, with $50 million to be realized in 2025, are intended to improve net margins.
  
• Large-scale share buybacks suggest confidence in cash flow generation and are expected to enhance earnings per share.

United Parks & Resorts Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming United Parks & Resorts's revenue will grow by 2.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 13.0% today to 15.6% in 3 years time.
• Analysts expect earnings to reach $284.1 million (and earnings per share of $5.16) by about August 2028, up from $222.6 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $255.4 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.5x on those 2028 earnings, up from 11.4x today. This future PE is lower than the current PE for the US Hospitality industry at 21.6x.
• Analysts expect the number of shares outstanding to decline by 5.14% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.99%, as per the Simply Wall St company report.

United Parks & Resorts Future Earnings Per Share Growth

Risks

• Elevated weather-related disruptions, such as hurricanes, have previously impacted the company's attendance numbers significantly, reducing revenue and potentially affecting future profitability due to unpredictable climate conditions.
  
• The opening of Universal's Epic Universe Park may draw visitors away from United Parks & Resorts, potentially leading to decreased attendance and revenue, particularly at their Orlando locations.
  
• Inaccurate forecasting by United Parks & Resorts regarding future market conditions and overconfidence in strategic initiatives could lead to underwhelming financial performance compared to stated expectations, impacting investor sentiment and share price.
  
• The success of capital allocations towards new rides and attractions, if not executed effectively, could drain resources without delivering the anticipated increase in attendance or revenue growth.
  
• Failure to capture international visitors swiftly back to pre-pandemic levels could hinder recovery in attendance and revenue, especially since international attendance remains significantly lower than 2019 levels.

Valuation

• The analysts have a consensus price target of $56.545 for United Parks & Resorts based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $78.0, and the most bearish reporting a price target of just $44.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.8 billion, earnings will come to $284.1 million, and it would be trading on a PE ratio of 12.5x, assuming you use a discount rate of 11.0%.
• Given the current share price of $46.16, the analyst price target of $56.55 is 18.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.