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Feb. 22, 2020, 10:26 a.m. EST

Six Flags stock hammered after surprise loss, downbeat guidance and dividend cut

‘We didn’t think it could get worse … but it just did,’ says one analyst

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By Ciara Linnane, MarketWatch


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Flagging performance at theme parks slam Six Flags stock

Shares of theme park operator Six Flags Entertainment Corp. slid 18% Thursday to put them on track for a seven-year low, after the company swung to a surprise fourth-quarter loss, offered downbeat guidance and cut its dividend.

More than 7 million shares /zigman2/quotes/208050417/composite SIX -1.81%  had changed hands by early afternoon, about 4.6 times the 65-day average volume, as investors responded to weak attendance numbers, falling admissions spending and other weak metrics.

“We didn’t think it could get worse … but it just did,” is how Janney analyst Tyler Batory summed it up in a note to clients. Batory rates the stock as neutral.

The Grand Praire, Texas-based company posted a net loss of $11.16 million, or 13 cents a share, after a profit of $79.4 million, or 93 cents a share, in the year-ago period. The FactSet consensus was for EPS of 14 cents.

Revenue fell to $261.0 million from $269.5 million, but topped the FactSet consensus of $260.1 million, as attendance declined 3%. Admissions spending per capita fell 2% and in-park spending per capita rose 3%.

The numbers include charges relating to development agreements in China that were terminated after a Chinese partner defaulted, but the company acknowledged problems at its U.S. base business which excludes international operations and six U.S. parks that began operating since 2018.

Read now: This is why Six Flags’ stock is having its worst day ever

“We are working diligently to formulate a new strategic plan with the goal of restoring sustainable growth in attendance, revenue and profitability, and also to add directors with critical skills and experiences to our board,” the company’s new Chief Executive Mike Spanos, who joined in November, said in a statement.

On the company’s earnings call with analysts, Spanos, who came to Six Flags from PepsiCo, said the company needs to improve single-day visitor attendance and reduce operating costs that have increased at an average 2% rate in the same period as base revenue growth has grown less than 1%.

“Our park teams have worked hard to offset cost headwinds from minimum and competitive wage increases through other cost savings,” he told analysts, according to a FactSet transcript. “However, this has had an adverse effect on the guest experience and created downward pressure in certain areas of our guest satisfaction scores.”

Read now: Fingerprint taken for Six Flags season pass could clear way for class-action lawsuit

Interim CFO Leonard Russ, who is replacing Marshall Barber whose retirement was announced in the earnings release, said the attendance decline was due to weakness at parks in Mexico and at Six Flags’ Magic Mountain in Los Angeles. Austerity measures implemented by Mexican President Andrés Manuel López Obrador reduced government-sanctioned school group visits, while an accident at a nearby theme park deterred other visitors, he said.

Read now: This is the cheapest time to visit Disneyland and Disney World

“At Magic Mountain, we experienced poor weather, nearby fires and a delay in introducing our major new ride, West Coast Racers, which did not open, until after Christmas,” he said.

The outlook for 2020 remains gloomy, too.

/zigman2/quotes/208050417/composite
US : U.S.: NYSE
$ 19.51
-0.36 -1.81%
Volume: 0.00
July 2, 2020 4:00p
P/E Ratio
10.16
Dividend Yield
0.00%
Market Cap
$1.65 billion
Rev. per Employee
$609,878
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