Why Caesars Entertainment (CZR) Is Lower on Friday

NEW YORK (TheStreet) -- Caesars Entertainment (CZR) is tumbling on Friday after the casino-entertainment company announced an underwritten public offering of 7 million shares of common stock.

By market open, shares had taken off 6.5% to $19.72.

The Las Vegas-based company said it intends to also grant the underwriter, Citigroup, an option to purchase up to 1.05 million in additional shares.

On Thursday, Caesars announced it will close Harrah's Tunica, a casino resort in Mississippi. The property, which will cease operations June 2, had seen "persistent declines in business and increased competition," the company said in a statement.

"The decision to close Harrah's Tunica is another step in Caesars' ongoing efforts to increase free cash flow and improve performance," the company said.

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

"We rate CAESARS ENTERTAINMENT CORP (CZR) a SELL. This is driven by several weaknesses, 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 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 274.0% when compared to the same quarter one year ago, falling from -$469.70 million to -$1,756.90 million.
  • 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 -$11.05 in the prior year. This year, the market expects an improvement in earnings (-$4.70 versus -$22.05).
  • 49.44% is the gross profit margin for CAESARS ENTERTAINMENT CORP which we consider to be strong. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -84.53% is in-line with the industry average.
  • Compared to its closing price of one year ago, CZR's share price has jumped by 35.88%, exceeding the performance of the broader market during that same time frame. Regarding the future course of this stock, we feel that the risks involved in investing in CZR do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • CZR's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 3.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.

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