Caesars Entertainment (CZR) Stock Jumping Today on Potential Debt Restructuring Deal

NEW YORK (TheStreet) -- Shares of Caesars Entertainment Corp. (CZR) are higher by 22.98% to $13.70 in late morning trading on Wednesday, as sources tell Bloomberg the casino operator has reached an agreement with its senior creditors regarding the company's outlined debt restructuring plan.

The deal includes a prearranged bankruptcy for Caesars' largest unit as early as January 14. By placing its Caesars Entertainment Operating Co. segment into Chapter 11, it will help the company get a handle on the $22.9 billion in debt it acquired six years ago, during one of the largest leveraged buyouts ever, Bloomberg added.

By setting a mid-January filing date the company gives itself enough time to assure its senior creditors that they could receive the cash Caesars promised in October, without having to deal with the challenges of groups fighting during a bankruptcy proceeding, Bloomberg noted.

"They have to make first-lien creditors believe it's going to be really safe when they file. The creditors have a lot of control here. If they can't get first-lien creditors to go along, they have a real problem," a Columbia University Law School professor told Bloomberg.

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 a few notable 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 generally disappointing historical performance in the stock itself."

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 decreased by 19.3% when compared to the same quarter one year ago, dropping from -$761.20 million to -$908.10 million.
  • CZR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 36.42%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The gross profit margin for CAESARS ENTERTAINMENT CORP is rather high; currently it is at 50.32%. 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 -41.04% significantly underperformed when compared to the industry average.
  • CAESARS ENTERTAINMENT CORP's earnings per share improvement from the most recent quarter was slightly positive. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CAESARS ENTERTAINMENT CORP reported poor results of -$21.99 versus -$11.12 in the prior year. This year, the market expects an improvement in earnings (-$7.02 versus -$21.99).
  • The revenue growth came in higher than the industry average of 9.6%. Since the same quarter one year prior, revenues slightly increased by 1.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • You can view the full analysis from the report here: CZR Ratings Report

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