NEW YORK (TheStreet) -- Caesars Entertainment (CZR) shares closed trading up 2.9% to $15.62 on Tuesday after analysts at JP Morgan said that the company will likely skip a $224 million interest payment owed to junior bondholders ahead of the it's expected bankruptcy filing in early 2015, according to Bloomberg.
Caesars has been in negotiations with creditors to reorganize its debt as the company has reported net losses in each of the past five years. Those losses led the company to agree on an outline of a path to bankruptcy last month.
The company will have a grace period of 30 days to make the interest payments which are due December 15.
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 number of negative factors, 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 decreased by 19.3% when compared to the same quarter one year ago, dropping from -$761.40 million to -$908.10 million.
- Net operating cash flow has significantly decreased to -$87.20 million or 288.33% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, CZR has underperformed the S&P 500 Index, declining 20.81% from its price level of one year ago. 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's earnings per share declined by 7.6% in the most recent quarter compared to 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 -$21.43 versus -$11.12 in the prior year. This year, the market expects an improvement in earnings (-$14.59 versus -$21.43).
- 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.
- You can view the full analysis from the report here: CZR Ratings Report