International Speedway Stock Plunges on Earnings Warning

Shares of International Speedway Corp. crashed hard Tuesday after the leading provider of NASCAR stock-car races warned of lower-than-expected earnings for its fiscal third quarter ending Aug. 31 and for next year as well.

The stock (ticker: ISCA) tumbled $8.50 a share, or 20%, to a 52-week low of $34.50 in heavy trading on the Nasdaq Market, as more than 6 million shares changed hands.

Stocks of some other racetrack operators fell in sympathy, including Speedway Motorsports Inc. (TRK), which lost $1.19 to $21.81, and Dover Downs Entertainment Inc. (DVD), which slipped 13 cents to $13 a share, both in New York Stock Exchange composite trading.

Citing lower-than-forecast attendance at the Pepsi 400 race in Daytona Beach, Fla., on July 1, International Speedway said its third-quarter profit could be 2 to 3 cents a share below estimates. The company was expected to earn about 27 cents a share in the period, according to analysts surveyed by First Call/Thomson Financial.

Moreover, the company warned that “at least for the short term, ticket demand continues to grow, though not quite as quickly as in the past,” and that therefore it plans to build fewer new grandstand seats next year than planned.

The combination of those trends, plus costs related to a previously disclosed settlement of a lawsuit, “may cause the company’s 2001 [earnings] results to be 6 cents to 8 cents [a share] lower” than analysts’ consensus estimate of $1.72 a share, the company said.

International Speedway owns or operates 11 major racetracks, including the Daytona International Speedway and the California Speedway in Fontana. Amid the soaring popularity of stock-car racing in recent years--both in terms of live attendance and television viewership--International Speedway and its stock had flourished until November.

The stock peaked at $71.13 on Nov. 19 but then began sliding, in part because the shares were commanding a rich price-to-earnings multiple that made some investors nervous. Indeed, before Tuesday’s drop, the stock was still trading for a lofty 40 times its expected per-share earnings for fiscal 2000.

The company, based in Daytona Beach, said ticket sales for the Pepsi 400 were affected by several factors, including the threat of wildfires in Florida, higher gasoline prices and heavy rain during the week before the race. International Speedway didn’t disclose exact attendance figures, but the race typically draws well over 100,000 fans.

But more important was the company’s decision to cut its expansion plans in half, to about 20,000 new grandstand seats next year, because of softening ticket demand, said analyst Dennis McAlpine of the investment firm Ryan, Beck Southeast Research in New York. Even before Tuesday’s announcement, McAlpine rated the stock a “hold” because of its price-to-earnings ratio.

International Speedway and other track owners aren’t having problems selling their best seats that typically cost $90 or more, but “we may have reached a peak in the pricing ability at the low end,” meaning not as many fans are willing to keep paying higher prices for the least-desired grandstand seats, which now generally sell for $40 or $45 each, McAlpine said.

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Black Flag

Shares of International Speedway plunged 20% Tuesday after the operator of auto-racing tracks warned of disappointing profits. Monthly closes and latest:

Tuesday:$34.50, down $8.50

Source: Bloomberg News