Caesars Reduces Debt, Online Division Makes a Profit
Caesars Entertainment (NASDAQ: CZR) shared positive third-quarter news with investors on Tuesday, sharing that its Caesars Digital unit brought in a profit of $2 million compared to a $38 million loss the previous year. Additionally, the company made efforts to reduce its debt burden, lowering its outstanding liabilities from $13.08 billion at the end of 2022 to $12.45 billion by September 30th. This news could bring delight to investors who have deemed Caesars' balance sheet as ridden with more headwinds than tailwinds.
With an impressive adjusted EBITDA of $1.04 billion this quarter, a 4% increase from the same period in 2022, Caesars is steadily working on reducing its debt load. Analysts anticipate generating $7.2 billion in free cash flow from 2023 to 2027, as well as possessing $3.2 billion in liquid cash and available credit as of June 30, 2023, to give to debt reduction and investments in digital sports and iGaming markets. Although no significant debt maturities are slated until 2025, where $4.3 billion in corporate debt will be due, Caesars might, but likely won't, buy shares or give dividends until 2026. Out of the four largest US casino stocks, Caesars is the only one not issuing dividends.
While 2023 began with high anticipation for Caesars, the stock saw a 5% decline. After the third-quarter earnings report was released, analysts generally remained optimistic about the Harrah's operator. With some exceptions, such as CFRA Research's Zachary Warring, who upgraded Caesars to "hold" from "sell," six analysts lowered their target prices. Warring commented that the recent drop in share prices was justified for the company's debt burden, but now believes that Caesars shares trade around fair value. He emphasized that he'd like to see further progress with the balance sheet before expecting multiple expansion.
Some analysts believe that Caesars' property-level margins could be enhanced as the Rio Hotel & Casino Las Vegas, a low-margin venue, is no longer a part of the company's portfolio.
Several factors could contribute to an upswing in Caesars' stock value. The Las Vegas events calendar, like the upcoming Formula One (F1) Grand Prix event later this month, may bring positive effects for the company. During the F1 week, casino activity is expected to be on par with or exceed the credit play seen during New Year's Eve. Furthermore, preparations for next year's Super Bowl, which is being hosted in Las Vegas, are progressing and may offer potential property-level catalysts. Caesars' construction work on permanent casinos in Columbus, Nebraska, and Danville, Virginia, and an overhaul of Caesars Palace New Orleans is also underway. The New Orleans location is crucial for the Super Bowl in 2025.
With the Las Vegas Festival calendar including notable events, like the Formula One Grand Prix and the Super Bowl coming up, Caesars could potentially see a rebound in its stock. CEO Thomas Reeg shared on a conference call with analysts that they are expecting a lift in quarterly performance in the neighborhood of 5% due to these events. Additionally, Reeg mentioned that casino activity during the F1 week could parallel or surpass what they see during New Year's Eve, with similar expectations surrounding the Super Bowl next year.
Caesars has significant construction projects underway, including permanent casinos in Columbus, Nebraska, and Danville, Virginia, as well as an overhaul of Caesars Palace New Orleans. The importance of New Orleans for next year's Super Bowl adds to the importance of these projects, as the Super Bowl will be held there in 2025.
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Source: www.casino.org
