Vail Resorts (NYSE:MTN) has been assigned a new Buy rating by Bank of America (NYSE:BAC) Securities analyst Shaun Kelley on Friday, following the company's fiscal year 2023 fourth-quarter earnings call. Despite facing challenges such as inflation, a weak summer season, and a $39M headwind from the Australian market, Vail Resorts managed to meet investor expectations with robust pass sales and resilient EBITDA guidance for fiscal year 2024.
In the recent earnings call, Vail Resorts reported an increase in pass sales over the prior year period, with a 7% rise in units sold and an 11% boost in sales dollars. This strong performance was factored into the company's fiscal year 2024 projection, expecting nearly $1 billion in earnings over the next year. According to InvestingPro data, the company's revenue for the last twelve months (LTM2023.Q4) was $2889.36M, indicating a significant revenue growth of 14.39%.
Potential headwinds were also identified during the discussion. Labor costs, unfavorable weather conditions in Australia, and reduced demand for North American summer operations were among the challenges that affected profits in the fourth quarter of fiscal year 2023 and are expected to persist into the first quarter of 2024. Notably, the company's P/E Ratio stands at 33.27, suggesting a high earnings multiple, as per InvestingPro metrics.
Despite these hurdles, Vail Resorts managed to align its full season EBITDA with investor expectations. The company's ability to absorb costs while maintaining strong pricing and driving margins was seen as a positive indicator by Kelley. He also noted the company's strong dollar growth and positive move in Revenue per Available Room (RevPAR) data after a weaker summer period. Interestingly, InvestingPro Tips highlight that Vail Resorts has a history of high earnings quality, with free cash flow exceeding net income, and has been aggressively buying back shares.
Vail Resorts has announced plans to cap off a $180 million to $185 million investment in calendar year 2023. This includes Keystone’s 555-acre Bergman Bowl expansion set to open this season, a new high-speed quad replacing the existing two-person 5-Chair lift on Peak 8 in Breckenridge, and testing out its My Epic Gear program on a limited number of pass holders at several resorts. The company's commitment to investment is reinforced by an InvestingPro Tip that states the company yields a high return on invested capital.
The company is also investing in technology to increase resource efficiency. This includes the My Epic App, which recommends optimal boots and insoles for guests, and a data-driven approach to hiring and talent development. These efforts are expected to help the company achieve profit margins of over 30% in the future, according to Chief Financial Officer Angela Korch.
Bank of America Securities analyst Shaun Kelley's Buy rating on Vail Resorts reflects his confidence in the company's resilience and its ability to meet investor expectations amid challenging circumstances.
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