Why Shares of Vail Resorts Popped Thursday
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What's happening Shares of Vail Resorts rose as much as 11% on Thursday after the company handily beat the consensus estimate for its fiscal second quarter, raised its full fiscal year guidance and increased its quarterly dividend by a whopping 50% to $0.6225 per share.
Why it's happening While revenues came in slightly below analysts' expectations in the fiscal second quarter, the "beat" on earnings per share (EPS) was significant -- to the tune of 35%:
*Earnings before interest, taxes, depreciation and amortization -- a popular measure of cash flow.Source: Zacks Investment Research, Vail Resorts
That headline EPS figure of $3.10 is a bit misleading in isolation (in fairness to the company, it did not trumpet the number in its press release). Still, as my Foolish colleague Dan Caplinger pointed out earlier today, "even after adjusting for a large one-time income-tax benefit following an IRS settlement, adjusted earnings of around $2.46 per share were quite a bit higher than the $2.30 per share that investors expected."
Arguably more important to explaining today's share price pop -- and more important for long-term investors, in any event -- is the massive dividend increase, which is a strong vote of confidence on Vail Resorts management's part that the company's earnings power will support the higher payouts. At an annual payout of $2.49 and, based on the share price of $93.56 at 12:30 p.m. EDT, Vail Resorts yields 2.7% -- a healthy return (for reference, the S&P 500's dividend yield is 2%).
CEO Rob Katz said the increase "demonstrates our confidence in the stability of our business model through varying weather patterns and our consistent strong cash flow generation." Those are two characteristics that spell sunshine for any business-focused investor.
The article Why Shares of Vail Resorts Popped Thursday originally appeared on Fool.com.
Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool recommends Vail Resorts. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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