Caesars Entertainment (CZR) Stock Retreating on Restructuring Obstacles

NEW YORK (TheStreet) -- Shares of Caesars Entertainment (CZR) are falling by 8.24% to $6.57 in mid-afternoon trading on Friday, as concerns mount that lawsuits filed against the casino company will hinder the restructuring efforts of its bankrupt Caesars Entertainment Operating Co. subsidiary.

Thursday was day two of a trial to determine whether four separate lawsuits filed against Caesars Entertainment by some of its creditors can move forward.

The market would become more confident if it were aware that Caesars Entertainment wasn't going to be responsible for billions of dollars relating to pre-bankruptcy asset transfers between Caesars Entertainment and CEOC, Randall Eisenberg, a partner at the restructuring firm AlixPartners said, according to The Wall Street Journal.

CEOC's current restructuring plan is dependent on a $1.5 billion contribution from Caesars Entertainment, but that money wouldn't be available if the parent company lost the suits.

Separately, TheStreet Ratings team rates CAESARS ENTERTAINMENT CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CAESARS ENTERTAINMENT CORP (CZR) a HOLD. The primary factors that have impacted our rating are mixed-some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its notable return on equity, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and generally higher debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, CAESARS ENTERTAINMENT CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The revenue fell significantly faster than the industry average of 7.3%. Since the same quarter one year prior, revenues fell by 38.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 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 47.60%, 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.
  • Net operating cash flow has decreased to -$109.00 million or 15.34% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, CAESARS ENTERTAINMENT CORP has marginally lower results.
  • You can view the full analysis from the report here: CZR Ratings Report

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