SeaWorld Shares Sink On Dividend Suspension; Macquarie Calls It A Positive Step

Close on heels of SeaWorld Entertainment Inc SEAS suspending its dividend, Macquarie termed the move as correct. Despite the firm's positive take of the situation, it still believes the shares will fall, as dividend-enamored holders of the stock are likely to sell the stock.

Analyst Matthew Brooks commented that the firm had warned in a note issued in August that the dividend yield of the company was too high, limiting reinvestment. Subsequently, the firm had also warned in September that the company might have to borrow to fund its estimated dividend payment for 2016 due to bad weather.

Looking Forward

Macquarie sees bad weather as a headwind for earnings in the third quarter. Brooks also foresees downward revision of guidance now that the dividend suspension is announced. Macquarie lowered its second-half estimates for the company, with its estimates now at the low end of the management's estimated 2016 EBITDA range of $310 million to $340 million.

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Specifically, the firm lowered its visits estimate for the third quarter by 100,000 and that for the fourth quarter by 50,000. Furthermore, the firm's EBITDA estimates now stand at $312 million to $325 million, down from $321 million to $334 million.

The firm also warned against buybacks until sales and earnings start rising and recommended that it rather invests capital in new rides and attractions.

Brief Sector Analysis

Of the stocks in the sector, Macquarie views Cedar Fair, L.P. FUN as the most attractive amusement park for income investors. The firm also highlighted on the 5 percent forward dividend yield of Six Flags Entertainment Corp SIX.

Macquarie maintains its Neutral rating on the shares of SeaWorld with an attached price target of $13 on the shares.

At time of writing, SeaWorld was seen down 4.49 percent at $12.12.

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