Morningstar | Lagging Attendance Weighs on International Speedway's Performance; Shares Fairly Valued
Marked improvement in adjusted earnings per share (to $0.26 from $0.06 in the year-ago quarter) at narrow-moat International Speedway was largely facilitated by a Chicagoland race moving into the third quarter from the fourth and a new music event being held at California. However, underlying this robust bottom-line growth was a 14% decline in attendance and 2.5% downtick in average ticket prices, implying that the brand intangible asset could be weakening if the sport falls further out of favor with fans longer term. The firm lowered its 2018 outlook to $675 million-$680 million (from $680 million-$695 million, versus our $693 million estimate prior), EBITDA to $235 million-$240 million (from $241 million-$252 million, versus our $248 million forecast) and EPS to $1.90-$1.95 (from $1.90-$2.10, versus our $2.06 estimate). We plan to reduce our $39 fair value estimate by $2-$3 to account for near-term admission and ticket price headwinds. We view the shares as fairly valued, trading at a high teens multiple after incorporating the flow-through of third-quarter results.We don’t plan to shift our longer-term outlook, which already included below 1% increases in admissions, low-single-digit motorsports-related revenue and expense growth, largely contracted through 2024, and modest expense leverage over time. We anticipate the continuous innovation across industry players to entice consumers to participate will largely toe the line on fan engagement, including alterations to the 2019 rules package, weather protection plans, facility updates, and altered racing, like that which most recently occurred at rival Speedway Motorsports' Charlotte track with road and track racing (roval). We still think incremental demand will shift to digital from traditional channels and International Speedway could benefit if it can extract economics from the digital channel (which lie with the broadcast partner currently) longer term.
International Speedway owns motorsports entertainment facilities and promoter of motorsports themed entertainment activities in the U.S. The company's motorsports themed event operations consist primarily of racing events at its motorsports entertainment facilities. The company conducts, either through operations of the particular facility or through its wholly owned subsidiary, Americrown Service Corporation, food and beverage concession operations and catering services, both in suites and chalets. The company's subsidiary, Motor Racing Network, Inc. creates motorsports-related programming content carried on radio stations around the country, as well as on a national satellite radio service, Sirius XM Radio.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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