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TheStreet Open House

Why Caesars Entertainment (CZR) Stock Is Falling Today

Stocks in this article: CZR

NEW YORK (TheStreet) -- Shares of Caesars Entertainment  (CZR) are dropping -9.57% to $12.70 following two lawsuits.

First, its noteholders are suing the company for allegedly fraudulently transferring assets. 

The noteholders said in their lawsuit that they believe billions of dollars of assets were transferred out of CEOC, or Caesars Entertainment Operating Company, to put the properties out of reach of creditors in preparation for a default on some of its $25 billion in debt, Reuters reports.

Secondly, the casino company filed a lawsuit against its investors today, claiming they were seeking a default to turn a profit, Reuters added.

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Caesars Entertainment claims certain institutional investors attempted to thwart its restructuring efforts through actions apparently designed to push CEOC into default.

Separately, TheStreet Ratings team rates CAESARS ENTERTAINMENT CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate CAESARS ENTERTAINMENT CORP (CZR) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 77.6% when compared to the same quarter one year ago, falling from -$217.60 million to -$386.40 million.
  • Net operating cash flow has significantly decreased to -$94.50 million or 104.54% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • In its most recent trading session, CZR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • CAESARS ENTERTAINMENT CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CAESARS ENTERTAINMENT CORP reported poor results of -$22.05 versus -$11.12 in the prior year. This year, the market expects an improvement in earnings (-$4.70 versus -$22.05).
  • 49.11% is the gross profit margin for CAESARS ENTERTAINMENT CORP which we consider to be strong. Regardless of CZR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CZR's net profit margin of -18.38% significantly underperformed when compared to the industry average.
  • You can view the full analysis from the report here: CZR Ratings Report
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