SBJ/March 1 - 7, 1999/No Topic Name
Deals spark rally for 2 stocks
Published March 1, 1999
The title-sponsorship agreements reached last month by Speedway Motorsports Inc. and Penske Motorsports Inc. are proving to be a boon to shareholders.
Late last month Penske Motorsports, which owns or has interests in five tracks, signed a title-sponsorship agreement with General Mills Inc. for a Winston Cup and Busch Series weekend. The company's stock soared on the news, rising 16 percent on the day the transaction was announced.
Last week Speedway shares were upgraded by Raymond James Financial Inc. to "accumulate" from "neutral," in part because of the bottom-line impact of the firm's 10-year, $35 million naming-rights deal with Lowe's Cos. for the former Charlotte Motor Speedway.
The deal opens a new avenue of sponsorship revenue that could provide earnings growth for all track operators, said Scott Barry, a Raymond James analyst.
If Speedway signed a similar agreement for each of its five other facilities, earnings would rise by 17 percent this year alone, Barry estimated.
The Lowe's deal will add 2 to 3 cents a share to Speedway's earnings in 1999 and 2000, bringing the totals to $1.18 and $1.43 per share, respectively, Barry predicted.
Speedway Motorsports had 1998 revenue of $230 million. Barry predicted that number would jump to $305.4 million this year and to $338.6 million next year.