Great Wolf raises outlook

The world's largest chain of indoor water parks expects to end year with a splash.

By Dec 21, 2011 1:54PM

By Zacks Equity Research

Great Wolf Resorts (WOLF) recently raised its revenue per available room (RevPAR) and adjusted EBITDA outlook for the upcoming fourth quarter as it believes the business is progressing impressively and above expectation.

The Madison, Wis., company expects adjusted EBITDA to exceed the higher end of its previous guidance range of $10.5 to $12.5 million and same-store RevPAR growth to be 8.5%, up from the earlier projections of 6 to 8%.

For fiscal 2011, the company anticipates adjusted EBITDA in excess of $80 million, compared with its prior forecast of $78 million to $80 million. Great Wolf also raised the midpoint of its EBITDA guidance in the third quarter by $1.5 million, based on solid operating performance. Great Wolf projects same-store RevPAR growth in 2011 to be 9%, which is the midpoint of its previous guidance range of 8% to 10%.

Great Wolf, the world's largest chain of indoor water parks, has also announced its outlook for 2012. The company is experiencing strong performance and expects to close the current year on a high. For 2012, the company projects adjusted EBITDA in the range of $83 million to $89 million, led by same-store RevPAR growth of 3% to 7%.

As a result, the company’s share price rose 40 cents to close at $2.70 on Friday. It held onto those gains this week, trading at $2.75 on Wednesday.

In the recently concluded third quarter, Great Wolf reported earnings of 5 cents per share, which beat the Zacks Consensus earnings of break-even. Total revenue jumped 7.2% to $83.6 million, benefiting from increased demand. Same-store RevPAR for the quarter rose 9.1% and adjusted EBITDA soared 167 basis points to 34.6%. Operating income spiked 30.3% to $13.2 million, attributable to cost-containment efforts.

The Zacks Consensus Estimates for the fourth quarter of 2011 and fiscal 2011 are pegged at a loss of 49 cents and 86 cents, respectively. We expect estimates to go up in the coming days as the company raised its outlook and booking remains strong.

Great Wolf, which competes with Wyndham Worldwide Corporation (WYN) and Choice Hotels International Inc. (CHH), expects to report fourth quarter 2011 results on February 20, 2012.

Great Wolf currently retains a Zacks No. 2 Rank, which translates into a short-term "buy" rating. We are also maintaining our long-term "neutral" recommendation on the stock.

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