NEW YORK (TheStreet) -- Shares of Caesars Entertainment Corp. (CZR) are higher by 23.80% to $16.70 in pre-market trading on Monday, after the company announced that it, along with its affiliate Caesars Acquisition Co. (CACQ) , have entered into an agreement to merge in an all-stock transaction.
The combining of the two companies will create one of the largest gaming and entertainment companies in the world, Caesars Entertainment said. The merged company will also be the preeminent gaming and hospitality company in Las Vegas.
The acquisition will serve to better position Caesars Entertainment to restructure the $18.4 billion debt loan of its largest unit, sources told the Wall Street Journal.
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The merged company will have $1.7 billion in cash and facilitate the completion of the restructuring of Caesars Entertainment Operating Co., the company said.
"The merger of Caesars Entertainment and Caesars Acquisition solidifies our focus on owning assets in destination and high-growth markets and businesses, while maintaining the benefits of operating our network and the Total Rewards loyalty program," said Caesars Entertainment CEO Gary Loveman.
"Upon completion of the merger and restructuring, Caesars Entertainment Corp. entities will be financially strong, with significantly reduced leverage and a much simpler and straightforward corporate structure," Loveman added.
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, 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.
- Looking at the price performance of CZR's shares over the past 12 months, there is not much good news to report: the stock is down 34.94%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier 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.
- 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 (-$4.70 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