Caesars Entertainment is poised to show a stronger hold than its competitors on the Las Vegas Strip when it reports earnings next Tuesday, but investors shouldn’t expect it to hit consensus estimates. That’s the latest assessment from Deutsche Bank analyst Carlo Santarelli, who urged caution amid rising expectations for the casino giant.
Analyst Cautions Against Overconfidence in Caesars’ Results
Wall Street has been optimistic about Las Vegas operators after MGM Resorts and Wynn Resorts posted fourth-quarter results that were better than expected. This led to stock price jumps for both companies. But Santarelli is warning that the same trend may not hold for Caesars.
MGM’s Strip-adjusted EBITDAR (Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring/Rent costs) dropped 11% year-over-year in Q4, while Wynn’s adjusted EBITDAR declined just 1%, mainly due to high hold, he noted. Despite those declines, both casino giants managed to beat analyst projections.
Caesars, however, may not be able to repeat that pattern.
Caesars’ Hold-Adjusted Performance Stands Out
Despite the lower consensus expectations, Caesars is still expected to post the strongest hold-adjusted fourth-quarter performance among the group, according to Santarelli. Hold percentage—essentially the amount of money casinos keep from gamblers—has been a key differentiator in recent earnings reports.
Wynn and MGM both benefited from favorable reactions in the stock market after their Q4 reports, but Caesars may not be able to count on the same support. Investors have already adjusted their outlooks for Las Vegas gaming companies based on prior reports, which means expectations for Caesars might be higher than they should be.
Forecast Adjustments for Caesars’ Key Segments
With fourth-quarter regional gaming revenue results finalized, plus Las Vegas data and earnings from MGM and Wynn as benchmarks, Deutsche Bank has refined its forecasts for Caesars across different business segments.
Santarelli outlined the following changes:
- Las Vegas Strip and digital operations forecasts were revised downward, reflecting a more cautious outlook for those segments.
- Regional casino forecasts were increased slightly, signaling stronger-than-expected performance outside of Las Vegas.
While Caesars’ overall earnings may not surprise investors, its regional segment could provide a silver lining.
What to Watch for in Caesars’ Upcoming Report
As the earnings release approaches, investors will be keeping a close eye on:
- Hold performance: Caesars is expected to outperform its peers in hold-adjusted metrics, which could provide some cushion against softer overall numbers.
- Las Vegas Strip performance: Given that MGM and Wynn both saw EBITDAR declines, Caesars’ Strip results will be closely scrutinized.
- Stock market reaction: If Caesars fails to meet consensus estimates, its share price could face pressure, despite stronger hold metrics.
Santarelli’s advice? Don’t get carried away by recent market enthusiasm. With expectations already baked in, Caesars may have a tougher time delivering a post-earnings boost.
