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What's Up at Caesars Entertainment (CZR) in Q3 Earnings?

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Caesars Entertainment CorporationCZR is set to report third-quarter 2015 results on Nov 9. Last quarter, it posted a positive earnings surprise of 225.00%. However, the company has a trailing four-quarter average negative earnings surprise of 6.00%.

Let's see how things are shaping up for this announcement.

Factors to Consider

Caesars Entertainment has not been able to post profits for a long time. The company has missed the Zacks Consensus Estimate in all the quarters, but one, since the second quarter of 2013. The losses resulted from heavy debt which pushed up interest expenses.

The gaming company was taken private in 2008 by private equity firms Apollo Global Management and TPG Capital in a leveraged buyout of around $30 billion. It started trading again following its 2012 Initial Public Offering.

Despite its efforts to lower debt, such as a restructuring plan, the company has not been able to accomplish the goal. In fact, the costs related to these initiatives hurt profits and we expect results to remain soft in the to-be-reported quarter.

Nevertheless, the company is heavily spending on renovation to boost traffic. It is enhancing its hospitality and entertainment assets in the high-growth markets, such as Las Vegas which is witnessing an improving visitation pattern. Given the optimism surrounding tourism in this region, we expect the properties to boost third-quarter revenues.

Investments in new and exciting hospitality amenities and ongoing investments in Caesars Interactive Entertainment ("CIE") are reaping benefits. CIE should continue to perform strongly driven by solid organic growth in its social and mobile games business as a result of its focus on monetization.

On the other hand, the company is making efforts to cut expenses through cost saving initiatives. These efforts should aid margin expansion in the third quarter.

Earnings Whispers

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

Zacks ESP : The Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 22 cents.

Zacks Rank : Caesars Entertainment's Zacks Rank #3 which when combined with a 0.00% makes surprise prediction difficult.

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

Stocks That Warrant a Look

Here are some companies in the 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:

Smith & Wesson Holding Corporation SWHC , with an Earnings ESP of +5.00% and a Zacks Rank #3.

Nord Anglia Education, Inc. NORD , with an Earnings ESP of +4.35% and a Zacks Rank #2.

Vail Resorts Inc. MTN , with an Earnings ESP of +3.93% and a Zacks Rank #2.

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CAESARS ENTERTN (CZR): Free Stock Analysis Report

SMITH & WESSON (SWHC): Free Stock Analysis Report

NORD ANGLIA EDU (NORD): Free Stock Analysis Report

VAIL RESORTS (MTN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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