Will Caesars Entertainment's (CZR) Q3 Earnings Disappoint? - Analyst Blog

Caesars Entertainment Corporation (CZR) is slated to report its third-quarter 2014 results on Nov 10, 2014. Last quarter, it posted a negative surprise of 86.29%. Let's see what is in store this season.

Factors to Consider

Caesars has not been able to post profits for a very long time. This gaming company has been missing the Zacks Consensus Estimate consistently since the second quarter of 2013. The consistent losses reflect the company's heavy debt load, which has increased its interest expenses.

Caesars Entertainment (formerly known as Harrah's Entertainment) was taken private in 2008 by private equity firms Apollo Global Management and TPG Capital in a leveraged buyout of around $30 billion. However, it launched an initial public offering in 2012 and begun trading again.

Despite making efforts to curtail its debt, the company has not been able to accomplish it. The company has designed a comprehensive plan to aid independent stock listing and significant de-leveraging of its subsidiary, Caesars Entertainment Operating Co. Also, the company is in discussions with its creditors to pay off its debt.

Moreover, the global financial slowdown had a severe impact on the U.S gambling and casino industry. This accompanied with the highly leveraged nature of the buyout has kept Caesars Entertainment under pressure. Moreover, the company is heavily spending on renovation of its properties to boost traffic, which is currently hurting the profits of the company.

The company runs casinos across the U.S., primarily in Las Vegas and Atlantic City. Unfortunately, Atlantic City, once East Coast's gambling hub, is currently facing stiff competition after gambling was legalized in neighboring states including Pennsylvania and New York, thereby hurting the revenues of the companies operating in the region. Also, Las Vegas revenues have remained sluggish over the past two quarters. Given the scenario, we expect revenues to remain soft in the soon-to-be-reported quarter as well.

Earnings Whispers?

Our proven model does not conclusively show that Caesars Entertainment is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: Caesars Entertainment's ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at -2.38%.

Zacks Rank #4 (Sell): We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some companies in the gaming and consumer discretionary sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Isle of Capri Casinos, Inc. (ISLE) has an Earnings ESP of +40.00% and a Zacks Rank #3 (Hold).

Boyd Gaming Corp. (BYD) has an Earnings ESP of +10.00% and a Zacks Rank #3.

Central Garden & Pet Co. (CENT) has an Earnings ESP of +32.00% and a Zacks Rank #3.

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