So evidently pleased were Caesars Entertainment executives with their July and August revenues that they pre-announced them yesterday, although the quarter does not end until September 30. Bundled together with the pre-release was the disclosure of Caesars’ $3 billion sale ($1.2 billion after debt repayment) of William Hill’s overseas assets to 888 Holdings.
In an allusion to a song by the British punk-rock band The Clash, Truist Securities analyst Barry Jonas wrote “London is not calling, but Vegas and the Regionals are crushing.”
For the two-month period ending August 31, Caesars estimates its Las Vegas net revenues will be between $670 million and $684 million, comfortably above 2019’s same-store figure of $645 million. Regional casinos are expected to bring in more than $1 billion, a bit shy of 2019’s benchmark figure ($1.07 billion).
Cash flow in Las Vegas will be between $342 million and $364 million, far ahead of the $231 million recorded in July-August of 2019. (Due to COVID-19’s depletion of the casino economy, Wall Street prefers to measure 2021 numbers against pre-pandemic ones.) Regional cash flow is expected to fall between $407 million and $435 million, again a huge improvement on 2019’s $326 million and a likely reflection of cost-cutting measures taken during the pandemic.
“We continue to see CZR as well positioned across the board for a leisure-based Strip recovery,” wrote Jonas, adding that regional casinos were buttressed against any “reasonable COVID resurgence.” He also applauded Caesars’ omni-channel approach, to be further underwritten with proceeds from the William Hill sale, which he believes could swing Caesars Digital to profitability.
Overall, Jonas noted, Caesars is looking at $23 million to $69 million in quarterly profit and has already reached as much as 81 percent of Wall Street’s consensus revenue projection for the third quarter. As for write-downs, depreciation and amortization will be between $188 million and $200 million and Caesars will have to pay interest of $377 million or $393 million.
The William Hill sale brought a premium price of 9.2 times cash flow and is expected to close in the first quarter of next year. Jonas put a “buy” rating on CZR shares, with a price target of $126 a share. They presently trade around $105 a share.
