Caesars losses mount on weakness in Atlantic City, regional markets


Caesars Entertainment (NASDAQ:CZR) -4.9% AH after reporting a widening Q2 loss that more than doubled from the prior-year period, as strong Las Vegas results were offset by continuing weakness in Atlantic City and regional markets.

CZR's casino revenue during Q2 fell 1.9% Y/Y to $1.38B, while the company saw growth in its social and mobile gaming business.

Q2 operating expenses rose 4.5% to $2.08B, and interest expenses rose 21% to $653M.

CZR says expansion, including the opening of Horseshoe Baltimore, and ongoing capital structure initiatives aimed at reducing leverage will help future results.

CZR has enjoyed only one profitable year since 2008 as it has struggled to service $23B of long-term debt incurred in a leverage buyout, amid a drop in gambling in the U.S.

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Comments (4)
  • max135
    , contributor
    Comments (16) | Send Message
     
    This CZR is going to be a Zero for equity holders . Just add the numbers up. The higher end casinos in Vegas need to be upgraded and the others are dumps. AC is a complete mess.
    11 Aug 2014, 07:47 PM Reply Like
  • max135
    , contributor
    Comments (16) | Send Message
     
    This CZR is going to be a Zero for equity holders . Just add the numbers up. The higher end casinos in Vegas need to be upgraded and the others are dumps. AC is a complete mess.
    11 Aug 2014, 07:47 PM Reply Like
  • azatlin
    , contributor
    Comments (9) | Send Message
     
    (Disclaimer: I don't have a position in CZR but I did recommend shorting them)

     

    This is a real estate company, not a gambling den. Most of their properties are old and in dire need of TLC, but that's like saying that they are the worst house in a neighborhood where values always go up.

     

    As long as they can make the interest payments, there's money here.
    And if cash flow becomes a problem, they can sell off some properties. Bally's Vegas alone would go for at least $2B (undeveloped land and the New Frontier (a crappier casino across from the Wynn) just went for $1.2B and Blackstone paid $1.7B for the Cosmopolitan).

     

    And cash flow is very much a problem.
    Instead of rising revenues or better gross margins or both, they face flat revenues and falling gross margins.

     

    The story is a bit muddied by the casino closings and some financial shell-game activity. But overall the debt-load is putting a squeeze on them at a time when they are losing money.

     

    And they have a bad mix of properties, unlike MGM. CZR has concentrated on the low-end, and lower-income gamblers are AWOL.

     

    Worse, this is the economic peak. We are now into the 6th year of a recovery. That means revenue growth isn't likely to improve much.

     

    The problem for CZR is that they are a real estate company behaving like a gambling company. They don't want to sell-off properties, but that's exactly what real estate is all about.
    11 Aug 2014, 08:52 PM Reply Like
  • Joshua Heller
    , contributor
    Comments (553) | Send Message
     
    Bally's in effect was already sold in 2014 from operating entity (CEOC) to (CGP). It was sold with a collection of assets for 2.2B including debt.

     

    http://1.usa.gov/1poe0kK

     

    I would suspect Bally's is worth considerably less than The Cosmo which you reference. Bally's has 2800 guest rooms which is comparable to Cosmo's 2900. I believe that all of Bally's rooms were renovated in 2013 (I could not find a link to be 100% sure). Cosmo, which opened in December of 2010, still has room rates that are significantly higher.
    12 Aug 2014, 01:36 AM Reply Like
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