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Caesars Entertainment (CZR) Up 14.1% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Caesars Entertainment (CZR). Shares have added about 14.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Caesars Entertainment due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Caesars Entertainment's (CZR) Q3 Earnings & Revenues Top

Caesars Entertainment reported impressive third-quarter 2023 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Also, the top and the bottom lines increased on a year-over-year basis.

The company’s uptrend was primarily driven by the solid performance of the Regional segment on the back of the opening of two temporary gaming facilities, which are Caesars Virginia and Harrah’s Columbus Nebraska, as well as the reopening of Horseshoe Lake Charles. Also, gaming revenues from the Caesars Digital segment, attributable to additional state launches of its online and retail Caesars Sportsbooks, added to the growth momentum. Additionally, improvements in the year-over-year hotel occupancy rates within the Las Vegas segment bode well, despite the ongoing economic uncertainties.

Earnings & Revenue Discussion

During the quarter, the company recorded adjusted earnings per share (EPS) of 34 cents, beating the Zacks Consensus Estimate of earnings of 27 cents per share by 25.9%. In the prior-year quarter, the company reported an adjusted EPS of 24 cents.

Net revenues during the quarter were $2,994 million, beating the consensus estimate of $2,913 million by 2.8%. In the prior-year quarter, the company generated net revenues of $2,887 million.

Segmental Performance

During the third quarter, net revenues in the Las Vegas segment were $1,120 million, up from $1,077 million reported in the year-ago quarter. This segment’s net revenues were lower than our model’s expected value of $1,148.5 million. The segment’s adjusted EBITDA amounted to $482 million compared with $480 million reported in the prior-year quarter.

In the Regional segment, quarterly net revenues were $1,565 million, up from $1,530 million reported in the year-ago quarter. This segment’s net revenues were higher than our expected value of $1,516.7 million. The segment’s adjusted EBITDA reached a record value of $575 million compared with the $570 million reported in the prior-year quarter.

Third-quarter net revenues in the Caesars Digital segment were $215 million, up from $212 million reported in the prior-year quarter. Our estimate for this segment’s net revenues was $158.4 million, which was on the lower side of the reported figure. The segment’s adjusted EBITDA totaled $2 million compared with the $(38) million reported in the year-ago quarter.

In the Managed and Branded segment, net revenues during the quarter were $98 million, up from $70 million reported in the prior-year quarter. Our estimate for the metric was $77.8 million. The segment’s adjusted EBITDA was $20 million compared with the $22 million reported in the prior-year quarter.

Net revenues in the Corporate and Other segment in the third quarter were $(4) million compared with $(2) million reported in the prior-year quarter. Our model predicted the value to be $(0.5) million. This segment’s adjusted EBITDA totaled $(36) million compared with the $(22) million reported in the year-ago quarter.

Balance Sheet

As of Sep 30, 2023, Caesars Entertainment’s cash and cash equivalents were $841 million, down from $1,038 million reported as of Dec 31, 2022.

Net debt, as of Sep 30, 2023, was $11,614 million, down from $12,047 million as of Dec 31, 2022.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -44.28% due to these changes.

VGM Scores

Currently, Caesars Entertainment has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Caesars Entertainment has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Caesars Entertainment is part of the Zacks Leisure and Recreation Services industry. Over the past month, Royal Caribbean (RCL), a stock from the same industry, has gained 24.2%. The company reported its results for the quarter ended September 2023 more than a month ago.

Royal Caribbean reported revenues of $4.16 billion in the last reported quarter, representing a year-over-year change of +39%. EPS of $3.85 for the same period compares with $0.26 a year ago.

Royal Caribbean is expected to post earnings of $1.11 per share for the current quarter, representing a year-over-year change of +199.1%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.1%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Royal Caribbean. Also, the stock has a VGM Score of B.

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