S&P also noted the increasing likelihood of a restructuring in the near term for the largest casino owner in the U.S.
Caesars' "capital structure is unsustainable," S&P wrote in a note on Wednesday. "The company is burning cash to fund capital expenditures and interest payments, and we expect the company will need additional liquidity in 2015 to cover interest, capital expenditures, and debt maturities."
Caesars burned $730.5 million in cash in 2013, up from $497.5 million in 2012 and $149.4 million in 2011, according to Bloomberg.
Despite this, the stock rose 7.27% to $19.04 at 11:41 a.m. on Wednesday.
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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 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 265.8% when compared to the same quarter one year ago, falling from -$480.30 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 -$11.12 in the prior year. This year, the market expects an improvement in earnings (-$4.58 versus -$22.05).
- Compared to where it was a year ago, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- 49.44% is the gross profit margin for CAESARS ENTERTAINMENT CORP which we consider to be strong. It has increased from the same quarter the previous 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.
- Net operating cash flow has significantly increased by 59.84% to -$108.50 million when compared to the same quarter last year. In addition, CAESARS ENTERTAINMENT CORP has also vastly surpassed the industry average cash flow growth rate of -31.48%.
- You can view the full analysis from the report here: CZR Ratings Report