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Speedway Motorsports: Engines Started

Autoracing is hot, and this racetrack owner is revved up.

Auto racing is one of the country’s most popular and fastest-growing spectator sports -- the evidence is everywhere. Corporate sponsorship is exploding on the Nascar circuit. The sportsfan base is swelling and includes more young and female enthusiasts than ever before. Colleges have even responded to the racing industry’s growing popularity by offering motorsports programs, with classes in mechanics, engineering, and management. And just this week, Walt Disney-Pixar released Cars, its animated flick about life at the racetrack..

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Investors can also capitalize on the exploding popularity of the sport. One of the biggest names in the business is racetrack operator Speedway Motorsports, which owns five of the ten largest racetracks in the U.S. Speedway’s roster includes Atlanta Motor Speedway, Bristol Motor Speedway, Infineon Raceway in Sonoma, Calif., Las Vegas Motor Speedway, Lowe’s Motor Speedway, in Concord, N.C., and Texas Motor Speedway in Fort Worth.

Speedway (symbol TRK) has a lot going for it. Revenues from broadcasting, admissions, and souvenirs all posted double-digit growth in 2005. Overall revenue grew 22%, to $544 million, while earnings rose 23%. The Concord, N.C., company has been busy investing in future growth by revamping its facilities and expanding seating capacity and luxury suites. Speedway has also been carving out new streams of revenue by adding onsite overnight accommodations with the construction of condominium units.

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Speedway’s shares are up 9% over the past year. At $38, the stock trades at 15 times the $2.58 per share that analysts expect the company to earn in 2006, according to Thomson First Call. Analysts, on average, expect earnings in 2007 to fall to $2.48 per share. But the Upside newsletter, edited by Richard Moroney, says that Speedway 2007 estimates seem “unduly flat” and that the company could well surpass that forecast. Upside recently initiated coverage of the stock with a "buy" rating.

Friedman Billings Ramsey also initiated coverage of the company this week with a "buy" rating and a 12-month price target of $45. Analysts David Marsh and Brooks Moore write that Speedway is "well positioned to capitalize on the long-term growth prospects of motorsports entertainment."

--Katy Marquardt

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