Speedway keeps hammer down and share price up.

• Author: Williams, Christopher C.
• Position: Charlotte Motor Speedway

Powered by passionately loyal fans and a growing lineup of corporate sponsors, stock-car racing has emerged as one of the fastest-growing spectator sports in the country. The excitement has helped drive the stock of Speedway Motorsports Inc. (TRK-NYSE) up 183% since it went public a year and a half ago.

"Speedway is one of the few ways [for investors] to participate" in the popularity of stock-car racing, says F. Breck Wheeler, an analyst with J.C. Bradford & Co. in Nashville, Tenn. It "enjoys strong operating margins in an industry with significant barriers to entry."

The Concord-based owner of Charlotte Motor Speedway and other racetracks in the Southeast has seen business soar. From 1990 through 1995, Speedway's operating income grew at an annual compound rate of about 26%, with revenue growth keeping pace at 21%, according to J.C. Bradford, one of the underwriters of Speedway's initial public offering. It posted operating profit margins of close to 40% last year. Over the next five years, analysts say, Speedway has enough gas to keep increasing revenues and earnings at a 20% clip.

Racing is outpacing its image as a redneck obsession. New tracks have sprouted in New Hampshire and California. From 1993 to 1995, attendance at the 31 Winston Cup events, racing's major league, increased at a compound rate of 15%. Events averaged 170,000 fans in 1995. TV ratings jumped 17%.

But what happens when this hot sport starts cooling off? That depends on how well Speedway's management takes advantage of its growth opportunities - such as expanding racetracks, acquiring new ones and increasing broadcast revenues. This is the company's "window of opportunity," says H.A. "Humpy" Wheeler, Speedway's president and chief operating officer (no relation to the analyst).

Besides Charlotte Motor Speedway, it owns tracks in Atlanta and Bristol, Tenn., and has an interest in one in North Wilkesboro. Its tracks hold 12 NASCAR events - seven Winston Cup and five Busch Grand National races. Speedway is spending more than $100 million to build a 1.5-mile superspeedway in Fort Worth, Texas, scheduled to open next spring.

It's an aggressive acquirer in a fast-consolidating industry. Many track owners lack the capital to expand and are being gobbled up by rivals such as Speedway, which netted $78 million from a secondary offering in March. "We are looking at opportunities every day," Humpy Wheeler says. He says the company would like to buy the Pocono, Pa., track.

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