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TheStreet Open House

Will These Ratings Downgrades Hurt SeaWorld (SEAS) Stock Today?

NEW YORK (TheStreet) --SeaWorld Entertainment Inc. (SEAS) was downgraded to “market perform” from “outperform” at Wells Fargo (WFC) on Thursday.

The firm said it lowered its rating on the marine mammal amusement park as SeaWorld has low visibility as it cut its guidance.

On Wednesday, SeaWorld's stock declined as a result of disappointing second quarter earnings and after issuing full year sales guidance below analysts' expectations.  

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SeaWorld was also downgraded at Bank of America/Merrill Lynch (BAC), to “neutral” from “buy,” the firm cited the earnings miss and weak guidance as its reason for the ratings downgrade.

Shares of SeaWorld are down -1.22% to $18.67 in pre-market trading today. 

Separately, TheStreet Ratings team rates SEAWORLD ENTERTAINMENT INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate SEAWORLD ENTERTAINMENT INC (SEAS) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 26.52%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 27.27% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Hotels, Restaurants & Leisure industry. The net income has decreased by 22.5% when compared to the same quarter one year ago, dropping from -$40.36 million to -$49.43 million.
  • The debt-to-equity ratio is very high at 2.79 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.32, which clearly demonstrates the inability to cover short-term cash needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Hotels, Restaurants & Leisure industry and the overall market, SEAWORLD ENTERTAINMENT INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for SEAWORLD ENTERTAINMENT INC is currently extremely low, coming in at 13.01%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -23.28% is significantly below that of the industry average.
  • You can view the full analysis from the report here: SEAS Ratings Report
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