The Zacks Analyst Blog Highlights: Caesars Entertainment, Century Casinos and Churchill Downs
For Immediate Release
Chicago, IL – November 18, 2014 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Caesars Entertainment Corporation (CZR-Free Report), Century Casinos Inc. (CNTY-Free Report) and Churchill Downs Inc. (CHDN-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday’s Analyst Blog:
Gambling Stock Roundup
Last week, three more companies in the sector posted third quarter results. Caesars Entertainment Corporation (CZR-Free Report), Caesars Acquisition Company as well as Century Casinos Inc. (CNTY-Free Report) however failed to impress investors with their performance in the quarter. Share price of all three companies declined in response in the aftermarket trading sessions.
However, the pessimism was partly countered by Churchill Downs Inc.’s (CHDN-Free Report) announcement to acquire Big Fish Games, which is one of the world's largest producers and distributors of mobile and online games. (Read last week’s development: Gambling Stock Round Up for Nov 10, 2014)
Recap of the Week’s Important Stories:
1. Caesars Entertainment posted lackluster third-quarter results with adjusted loss per share of $2.35 that was wider than the Zacks Consensus Estimate of a loss of $1.68 as well as from the year-ago quarter’s loss of 87 cents. Caesars was hurt by higher interest expenses and sluggish revenue growth at its casinos. Sluggish VIP volumes, the reduction of room nights available in Las Vegas as a result of The LINQ Hotel renovation, and business disruption at Caesars Palace due to construction and show cancellations resulted in lower core business volumes.
Marketing expenses also increased due to marketing programs aimed at retaining guests in Atlantic City, following the closure of the Showboat Atlantic City casino. This lowered the company’s profitability in important markets.
Net revenue of $2.21 billion increased 6% year over year, driven primarily by growth in the Caesars Entertainment Resort Properties and Caesars Growth Partners, LLC. However, revenues missed the Zacks Consensus Estimate of $2.27 billion by 2%, which was possibly due to lower room revenues. (Read: Caesars’ Q3 Loss Widens, Revenues Lag)
In one other development, the company reportedly stated in a filing that Caesars Entertainment Operating Co. currently has sufficient liquidity to survive. However, it also stated that the unit would not have enough cash to repay its debts by the fourth quarter of 2015 if it does not undergo a refinancing, amendment, private restructuring, or a re-organization under Chapter 11.
Caesars has not been able to post profits for a very long time, failing to recover from its debt load since the recession. The company has consistently made efforts through the sale of assets and deals with creditors to pay off its debt. Reportedly, the company is engaged in discussions with Elliott Management Corp and Pacific Investment Management Co, investment funds that own a large amount of the gaming company’s senior debt and other bond holders to back a plan to put the operating unit into bankruptcy in January.
Given the scenario, the company that employs 68,000 people worldwide has reportedly decided to lay off about 680 workers. The layoffs will be spread out evenly among the company's properties and corporate offices.
2. Caesars Acquisition Company is a casino asset and entertainment firm that was formed to make an equity investment in Caesars Growth Partners, LLC, a joint venture between CACQ and Caesars Entertainment. The company posted disappointing third quarter results with adjusted earnings of 2 cents that declined significantly year over year. Also, the company missed the Zacks Consensus Estimate of 46 cents by 95.7%.
3. Century Casinos posted dismal third-quarter 2014 adjusted earnings of 3 cents per share that missed the Zacks Consensus Estimate of 7 cents by 57%. Further, earnings declined 25% from the year-ago figure of 4 cents per share. The significant downside reflects a decline in revenues and higher non-operating expenses.
However, net revenue declined 2.4% year over year to $28.1 million and also missed the Zacks Consensus Estimate of $32 million by 12.2%. The decline in revenues reflects an 11% and 6% decline in revenues at Century Casino & Hotel, Central City and Casinos Poland, respectively. Adjusted EBITDA of $2.9 million was down 14% year over year, owing to a decline in revenues.
4. Churchill Downs has entered into an agreement with Big Fish Games, Inc. as per which the former will acquire all of the outstanding stock and equity interests of privately held Big Fish. Big Fish Games is one of the world's largest producers and distributors of mobile and online games. The transaction worth $885.0 million is structured on a cash-free/debt-free basis. The purchase price will be paid in cash, except for approximately $15 million that will be paid in common stock. Subject to regulatory approvals, the deal would support the company with new products, new customers, new geographies and new sizeable growth opportunities.
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