ISCA Earnings Call Analysis: ISCA - Anatomy of a Miss...and Capitulation?

International Speedway Corp (ISCA) reported a disappointing quarter and outlook on 10/5/18, resulting in a 17% drop in the stock. Did the company kitchen sink the guide? Or is this just the first shoe to drop?

We used the Amenity Viewer to analyze ISCA's recent earnings calls and look for insights related to those key questions.

ISCA Disappoints on Guidance

Company View Takeaways

  1. Amenity Score: Q3 registered an Amenity Score of 29, up from 20 the prior quarter
  2. Key Drivers: For the Q3 call, the Guidance category was more negative, as was Pricing, while it is noteworthy that the Deception category was less negative
  3. Amenity Score Trend: The 4-quarter time series shows that Q2 represented a steep drop by itself

The drop in Q2 leads us to first go back to that call to analyze what was so negative, and look for any clues to this upcoming miss.

Analysis of the Q2 Transcript (7/5/18) Revealed Some Caution Flags

  • 1. Was it all just weather? When analyzing the Amenity Key Drivers are sorted by Negatives, we find a clustering of weather issues in the Headwinds category, captured in both Prepared remarks and Q&A. Much like holidays, weather can be a common scapegoat for other underlying issues:

"The approximate 10% decrease is primarily related to lower attendance and admissions for certain NASCAR and other events held during the quarter, some of which were impacted by inclement weather"

"Weather was a big impact in the quarter."

  • 2. Deception events increasing as Amenity Score decreases. The Q2 call registered 8 events in our "Deception" category vs 6 in Q1. While not a massive change, analyzing these comments in the Viewer did reveal two comments that pointed to ongoing headwinds:

"So weather was an important part. But all in all, the attendance was a little softer than expected. We still have an issue with start power, and hopefully, this stable of young drivers coming along will start to win and build their brands, and - but I would also say that there is - I talked about our sales academy on the call, and we have retooled, elevated our sales culture."

"Let's face it though, when Sprint was in this sport, they were writing a check somewhere north of $75 million a year. And we, the industry, don't know if that is viable going forward for long-term deals."

  • 3. A mixed Q2 followed by a reiterated guide...less cushion? Despite a mixed quarter (including a drop in the Amenity Score to 20), the Viewer still showed a positive skew in forward-looking commentary (Guidance category). This was highlighted by reiterated FY guidance and optimism toward Q4, despite the challenges we see in the quotes above:

We remain optimistic out consumer-focused marketing and sales initiatives are working to bring ticket sales in line to deliver stronger admission and admission-related results."

"We're not out of it yet, but we think these initiatives are going to bear fruit, and so we're - we remain optimistic in these initiatives, and we're going to stick to them."

What then materialized in 3Q?

  • 1. ISCA lowered the bar for Q4:

"Our 2018 guidance includes what we've incurred year-to-date through the third quarter and the outlook for the fourth quarter where we've experienced some headwinds and declines in admissions. We've worked prudently on the cost side of the business to manage margins. There is some compression in the margin guidance. But our fourth quarter's going to be a little bit mixed."

  • 2. While weather still shouldered the blame, broader headwinds were acknowledged:

"Attendance for the comparable NASCAR events was down approximately 14% on average, and the average ticket price decreased to $83.88, or approximately 2.5%"

"Weather-related impacts were compounded by current headwinds in the ticket sales facing the sport."

  • 3. Events in "Deception" category dropped to just 3 vs 8 in Q2 and 6 in Q1

Putting all the pieces together:

  • Q2: Analysis in the Viewer highlighted increasing headwinds, a weakening Amenity Score, no cut to guidance, and comments that pointed to deeper issues than just the weather
  • Q3: The outlook was finally lowered, the Amenity Score stabilized, broader headwinds were acknowledged, and there were fewer comments flagged by Amenity's Deception events 
  • To the extent that less negative is sometimes the first positive, this analysis suggests ISCA may warrant a closer look.

Join the Amenity Viewer Beta Program today to analyze upcoming earnings calls as well as identify trends and findings from the data.

This communication does not represent investment advice. Transcript text provided by S&P Global Market Intelligence.

Copyright ©2019. All rights reserved.

November 27, 2019

Quarter in Review: Retail Therapy, Target & TJX

With the peak of earnings season and Black Friday in the rear view mirror, we spent Cyber Monday using Amenity's suite of NLP tools to check on major retailers that have held earnings calls in the fourth calendar quarter of 2019. We present an analysis of the Retailing GICS Industry Group and confirm a significant bifurcation between small and large retail operations. We then offer deeper context for two widely followed retailers: Target Corporation (TGT) and The TJX Companies, Inc. (TJX). Our models uncovered evidence to suggest there may be tariff risks emerging that have not yet been fully digested by markets.
November 26, 2019

Deception Spotlight: Smucker Jammed on Revenue Growth

We highlight The J. M. Smucker Company (SJM) following the company’s 2Q20 earnings call on 22 November 2019. Despite beating EPS estimates, the underlying story remains unsettling. Focusing more on the longer-term, our analysis finds questions about revenue have triggered deceptive answers by management in earnings calls at an increasing rate, which may further erode confidence given the ongoing calls for top-line improvements. This sort of evidence may provide fodder for bear theses and be a honeypot for activists. We narrate the context for our concern and detail deceptive language detected by Amenity’s NLP models.
November 21, 2019

Amenity Portfolio Analytics: Warren Buffett's Portfolio at Berkshire Hathaway

We pilot a method for using Amenity's NLP solutions to analyze earnings calls for multiple companies and scoring their impact on portfolios of diverse, unevenly distributed holdings. We analyze Warren Buffett's holdings at Berkshire Hathaway as a test case and detail the Oracle of Omaha's Amenity Portfolio Score with attribution at the position level. We find that Berkshire Hathaway's portfolio score is significantly greater than the average company score in our universe (>12k companies, >10 years), which is a function of Buffett favoring companies with positive Amenity Scores.
October 30, 2019

Ahead of the Fed: S&P 500 Bank Barometer

We’re back on Fed Watch! With the Federal Reserve’s Open Market Committee expected to announce another rate decision at 2pm on 30 October 2019, markets have baked in more than a 90% likelihood of a 25 basis point cut. We've kept a close eye on regional and diversified banks as earnings season progresses to gauge how lower rates are impacting management commentary as well as their business and economic implications. We share our analysis context ahead of the Fed’s announcement and press conference.

Stay Informed: Join Our Newsletter

Keep up to date with our analyses and how we're making changes.