Is Wall Street Bullish or Bearish on Caesars Entertainment Stock?

DraftKings Inc. DKNG is scheduled to report third-quarter 2024 results on Nov. 7, after the closing bell. In the last reported quarter, the company registered an earnings surprise of 500%.

DKNG’s Estimates Trend Upward

The Zacks Consensus Estimate for third-quarter adjusted loss per share has narrowed to 42 cents from 43 cents in the past 30 days. In the prior-year quarter, the company had reported an adjusted loss per share of 61 cents. For revenues, the consensus mark is pegged at $1.12 billion, suggesting a 41.6% year-over-year gain.

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What the Zacks Model Unveils

Our proven model predicts an earnings beat for DraftKings this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: DraftKings has an Earnings ESP of +13.83%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

DraftKings Inc. Price and EPS Surprise

DraftKings Inc. price-eps-surprise | DraftKings Inc. Quote

What’s Shaping DKNG’s Q3 Results?

DraftKings’ third-quarter performance is likely to have been aided by increased new online sportsbook and iGaming customers. The company has expected the strong pace of customer acquisition to persist throughout the second half of the year and extend further. An increase in Monthly Unique Payers (MUPs) is likely to have boosted the company’s top line.

The integration of Jackpocket has contributed to customer acquisition and is expected to have driven additional revenues. The acquisition of Jackpocket, with its low customer acquisition costs, is helping DKNG reach a broader audience and expand cross-selling opportunities.

DraftKings is enhancing its product offerings to differentiate itself from competitors. The latest features, such as in-house player prop wagers across multiple sports and progressive parlays, have been attracting more users to its Sportsbook platform. DKNG is also likely to have benefited from decreased customer acquisition costs.

Although DraftKings experienced efficient customer acquisition, its marketing spending is likely to have grown due to ongoing investments in the Jackpocket brand. This increased spending is likely to have impacted adjusted EBITDA despite long-term acquisition benefits.

Increased sportsbook tax rates in Illinois, along with existing high-tax states like New York and Pennsylvania, are expected to have affected DraftKings’ bottom line.

Price Performance & Valuation

DKNG shares have gained 14% in the past three months, underperforming the Zacks Gaming industry but outperforming the S&P 500. In the same timeframe, other major industry players like Flutter Entertainment plc FLUT has risen 25.3%, Caesars Entertainment, Inc. CZR has rallied 14.7% and MGM Resorts International MGM has jumped 2.8%.

Price Performance

The S&P 500 Index Wednesday closed down -0.33%, the Dow Jones Industrials Index closed down -0.22%, and the Nasdaq 100 Index closed down -0.79%.

Stocks Wednesday relinquished early gains and posted moderate losses as a slide in chip stocks weighed on the broader market. Advanced Micro Devices closed down more than -10% to lead chip stocks lower after forecasting Q4 revenue below consensus. Also, some negative corporate news undercut stocks as Super Micro Computer plunged more than -32% after accounting firm Ernst & Young LLP resigned as SMCI’s auditor amid a US Justice Department probe of the company’s accounting practices.

Some strong earnings results on Wednesday were supportive of stocks. Alphabet rose more than +2% after it reported stronger-than-expected Q3 revenue late Tuesday. Also, Visa closed up more than +2% after reporting stronger-than-expected Q4 net revenue.

Better-than-expected US economic news Wednesday bolstered the prospects for a soft landing and was supportive for stocks after Q3 personal consumption rose more than expected, and the Oct ADP employment report showed employers added the most jobs in 15 months.

US MBA mortgage applications fell -0.1% in the week ended October 25, with the purchase mortgage sub-index up +5.0% and the refinancing mortgage sub-index down -6.3%. The average 30-year fixed mortgage rate rose +21 bp to a 3-month high of 6.73% from 6.52% in the prior week.

The US Oct ADP employment change rose +233,000, showing a stronger labor market than expectations of +111,000 and the biggest increase in 15 months.

US Q3 GDP grew by +2.8% (q/q annualized), slightly weaker than expectations of +2.9%. Q3 personal consumption rose +3.7%, stronger than expectations of +3.3%, and the Q3 core PCE price index eased to +2.2% from 2.8% in Q2.

US Sep pending home sales rose +7.4% m/m, stronger than expectations of +1.9% m/m and the largest increase in 4-1/4 years.

Caution in the markets persists ahead of a slew of key events, which include (1) this week's peak slate of earnings reports when more than 40% of the S&P 500's market cap is reporting, (2) Thursday's Sep PCE price deflator (expected to ease to +2.1% y/y nominal and +2.6% y/y core from Sep's +2.2% and +2.7%, respectively), (3) Friday's US Oct unemployment report (Oct payrolls expected +90,000 on strike and storm disruptions; Oct unemployment rate expected unchanged at 4.1%), and (4) next Tuesday's US election.

Also, four more of the Magnificent Seven stocks are releasing earnings this week. Meta Platforms and Microsoft reported after today’s close. Amazon and Apple report on Thursday.

Corporate Q3 earnings season is in full gear. Of the companies in the S&P 500 that have released earnings so far, 76% surpassed estimates. According to Bloomberg Intelligence, companies in the S&P 500 are expected to report an average +4.3% y/y increase in quarterly earnings in Q3, down from the +7.9% y/y growth consensus seen in July.

The markets are discounting the chances at 94% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 0% for a -50 bp rate cut at that meeting.

Overseas stock markets Wednesday settled mixed. The Euro Stoxx 50 fell to a 5-week low and closed down -1.30%. China's Shanghai Composite index slid to a 1-week low and closed down -0.61%. Japan's Nikkei Stock 225 rallied to a 2-week high and closed up +0.96%.

Interest Rates

December 10-year T-notes (ZNZ24) Wednesday closed down -1.5 ticks. The 10-year T-note yield rose +2.5 bp to 4.280%. T-notes Wednesday gave up an early advance and moved lower on the stronger-than-expected Oct ADP employment report. Also, signs of healthy consumer spending weighed on T-notes as US Q3 personal consumption rose more than expected. In addition, T-notes were pressured after European government bonds gave up an early rally and turned lower. Finally, an increase in inflation expectations was bearish for T-notes after the 10-year breakeven inflation rate climbed to a 2-1/2 week high Wednesday of 2.348%. T-note prices continue to be undercut by ideas that the US budget deficit will continue to be a major problem regardless of who wins next week's presidential election.

Some short covering supported T-notes Wednesday after the Treasury announced $125 billion of debt sales for its November quarterly refunding next week, right on consensus and unchanged from last quarter. Also, Wednesday’s weaker-than-expected US Q2 GDP report supported T-notes.

European government bond yields Wednesday moved higher. The 10-year German bund yield rose to a 3-month high of 2.388% and finished up +5.1 bp on that high. The 10-year UK gilt yield jumped to a 10-3/4 month high of 4.411% and finished up +3.7 bp at 4.352%.

Eurozone Q3 GDP grew +0.4% q/q and +0.9% y/y, stronger than expectations of +0.2% q/q and +0.8% y/y.

Eurozone Oct economic confidence unexpectedly fell -0.7 to a 6-month low of 95.6, weaker than expectations of an increase to 96.3.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 20% for a -50 bp rate cut at the same meeting.

US Stock Movers

Advanced Micro Devices closed down more than -10% to lead chip stock slower after forecasting Q4 revenue of $7.2 billion-$7.8 billion, the midpoint below the consensus of $7.55 billion. Also, GlobalFoundries closed down more than -6%, and Qualcomm and ASML Holding NV closed down more than -4%. In addition, Microchip Technology , NXP Semiconductors NV , and Micron Technology closed down more than -3%.

Super Micro Computer closed down more than -32% to lead losers in the S&P 500 and Nasdaq 100 after accounting firm Ernst & Young LLP resigned as SMCI’s auditor amid a US Justice Department probe of the company’s accounting practices.

Qorvo closed down more than -27% after forecasting Q3 revenue of $875 million-$925 million, well below the consensus of $1.06 billion.

Caesars Entertainment closed down more than -8% after reporting Q3 same-store net revenue of $2.87 billion, weaker than the consensus of $2.93 billion.

Chipotle Mexican Grill closed down more than -7% after reporting Q3 same-store sales rose +6.0%, below the consensus of +6.4%.

Eli Lilly & Co closed down more than -6% after cutting its full-year adjusted EPS estimate to $13.02-$13.52 from a previous estimate of $16.10-$16.60.

Otis Worldwide closed down more than -3% after reporting Q3 net sales of $3.55 billion, weaker than the consensus of $3.56 billion.

Caterpillar closed down more than -2% after reporting Q3 adjusted EPS of $51.7, weaker than the consensus of $5.34.

Alphabet closed up more than +2% after reporting Q3 revenue ex-TAC of $74.55 billion, better than the consensus of $72.88 billion, and Q3 cloud revenue of $11.35 billion, stronger than the consensus of $10.79 billion.

Garmin Ltd closed up more than +23% to lead gainers in the S&P 500 after reporting Q3 revenue of $1.59 billion, above the consensus of $1.43 billion.

Verisk Analytics closed up more than +4% to lead gainers in the Nasdaq 100 after reporting Q3 adjusted EPS continuing operations of $1.67, better than the consensus of $1.61.

Reddit Inc closed up more than +41% after reporting Q3 adjusted Ebitda of $94.1 million, well above the consensus of $58.9 million, and forecasting Q4 adjusted Ebitda of $110 million-$125 million, stronger than the consensus of $87 million.

Visa closed up more than +2% to lead gainers in the Dow Jones Industrials after reporting Q4 net revenue of $9.62 billion, better than the consensus of $9.49 billion.

FMC Corp closed up more than +10% after reporting Q3 adjusted EPS continuing operations of 69 cents, stronger than the consensus of 53 cents.

Dayforce D closed up more than +7% after reporting Q3 revenue of $440.0 million, better than the consensus of $428.1 million, and raising its full-year revenue forecast to $1.75 billion from a previous estimate of $1.74 billion.

Bio-Techne closed up more than +7% after reporting Q1 net sales of $289.5 million, stronger than the consensus of $280.2 million.

Snap Inc closed up more than +15% after reporting Q3 daily active users of 443 million, above the consensus of 441.16 million.

Earnings Reports (10/31/2024)

AES Corp/The (AES), Alliant Energy Corp (LNT), Altria Group Inc (MO), Amazon.com Inc (AMZN), Amcor PLC (AMCR), AMETEK Inc (AME), Apple Inc (AAPL), Aptiv PLC (APTV), Ball Corp (BALL), BorgWarner Inc (BWA), Bristol-Myers Squibb Co (BMY), Camden Property Trust (CPT), Cigna Group/The (CI), CMS Energy Corp (CMS), Comcast Corp (CMCSA), ConocoPhillips (COP), Coterra Energy Inc (CTRA), Eastman Chemical Co (EMN), Eaton Corp PLC (ETN), Entergy Corp (ETR), Erie Indemnity Co (ERIE), Estee Lauder Cos Inc/The (EL), Generac Holdings Inc (GNRC), Huntington Ingalls Industries (HII), IDEXX Laboratories Inc (IDXX), Ingersoll Rand Inc (IR), Intel Corp (INTC), Intercontinental Exchange Inc (ICE), International Paper Co (IP), IQVIA Holdings Inc (IQV), Juniper Networks Inc (JNPR), Kellanova (K), Kimco Realty Corp (KIM), Linde PLC (LIN), Mastercard Inc (MA), Merck & Co Inc (MRK), Norwegian Cruise Line Holdings (NCLH), Parker-Hannifin Corp (PH), Quanta Services Inc (PWR), Regeneron Pharmaceuticals Inc (REGN), Southern Co/The (SO), Teleflex Inc (TFX), Uber Technologies Inc (UBER), VICI Properties Inc (VICI), WEC Energy Group Inc (WEC), Willis Towers Watson PLC (WTW), WW Grainger Inc (GWW), Xcel Energy Inc (XEL), Xylem Inc/NY (XYL).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policyhere.

Caesars Entertainment, Inc. CZR reported tepid third-quarter 2024 results, with earnings and revenues missing the Zacks Consensus Estimate and declining year over year.

See the Zacks Earnings Calendar to stay ahead of market-making news.

The quarterly results reflect soft contributions from the Regional segment due to the adverse impact of new competition, construction disruption and difficult year-over-year comparisons. This, alongside tepid revenue contributions from the Managed and Branded and Las Vegas segments, added to the downtrend.

The headwinds were offset to some extent by growth in top-line contributions from the Caesars Digital segment.

CZR’s Earnings & Revenue Discussion

Caesars Entertainment reported an adjusted loss per share of 4 cents, which missed the Zacks Consensus Estimate of earnings per share (EPS) of 21 cents by 119.1%. In the prior-year quarter, the company reported an adjusted EPS of 34 cents.

Caesars Entertainment, Inc. Price, Consensus and EPS Surprise

Caesars Entertainment, Inc. price-consensus-eps-surprise-chart | Caesars Entertainment, Inc. Quote

Net revenues of $2.87 billion also lagged the consensus mark of $2.91 billion by 1.3%. In the prior-year quarter, the company generated net revenues of $2.99 billion.

Segmental Performance of Caesars Entertainment

Las Vegas: Net revenues in this segment totaled $1.06 billion, down 1.3% from $1.12 billion reported in the year-ago quarter. The segment was hurt due to a decline in casino revenues due to the decrease in gaming volume associated with the divestiture of Rio at the end of the third quarter of 2023 coupled with lower table games hold.

The segment’s adjusted EBITDA was $472 million, down 2.1% from $482 million in the prior year quarter.

Regional: This segment’s quarterly net revenues were $1.45 billion, down 7.6% year over year. The segment experienced competition in new markets. It was hurt by competition associated with new casino resorts opening in some of CZR’s regional markets, construction disruption from renovation projects at few of its properties and inclement weather in several property locations during the first quarter of 2024.

The segment’s adjusted EBITDA reached $498 million, down from $575 million in the prior-year quarter.

Caesars Digital: This segment’s net revenues were $303 million, up 40.9% year over year from $215 million. The segment benefited from a significant increase in iGaming handle along with improved and higher hold in sports betting.

The segment’s adjusted EBITDA totaled $52 million, up from $2 million in the year-ago quarter.

Managed and Branded: Net revenues in this segment totaled $68 million, down 30.6% from $98 million in the prior-year quarter. The segment’s adjusted EBITDA was $19 million, down from $20 million in the prior-year quarter.

Corporate and Other: The segment’s net revenues were $(5) million compared with $(4) million in the prior-year period. This segment’s adjusted EBITDA totaled $(40) million compared with $(36) million in the year-ago quarter.

Balance Sheet of CZR

As of Sept. 30, 2024, Caesars Entertainment’s cash and cash equivalents were $802 million, down from $1.01 billion as of Dec. 31, 2023.

Net debt as of the end of the third quarter was $11.9 billion, up from $11.43 billion as of 2023 end.

CZR’s Zacks Rank & Recent Consumer Discretionary Releases

Caesars Entertainment currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here.

Mohawk Industries, Inc. MHK reported strong third-quarter 2024 results (ended Sept. 30). Its earnings surpassed the Zacks Consensus Estimate and improved from the prior year despite pricing pressures and a negative mix.

On the other hand, net sales declined on a year-over-year basis but marginally beat the consensus mark. Mohawk noted slower-than-anticipated market conditions across the regions due to high interest rates, lingering inflation and lower consumer confidence. Commercial channels have also lost some momentum yet outperformed residential. Nonetheless, it expects recent interest rate cuts in the United States, Europe and Latin America to strengthen housing markets and increase flooring sales next year.

Royal Caribbean Cruises Ltd. RCL posted impressive third-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and bottom lines increased on a year-over-year basis.

The company exceeded its guidance, driven by stronger pricing on close-in demand, continued growth in onboard revenues and reduced costs due to timing factors. It has raised its outlook for 2024 and reported elevated demand patterns heading into 2025.

Mattel, Inc. MAT reported impressive third-quarter 2024 results, wherein adjusted earnings and net sales topped the Zacks Consensus Estimate. The top line surpassed the consensus estimate after missing it for three consecutive quarters. On a year-over-year basis, net sales declined while adjusted earnings grew.

The company’s quarterly results benefited notably from its Optimizing for Profitable Growth program, along with the focus on its multi-year strategy to expand its IP-driven toy business and entertainment offering. Although the top line was adversely impacted by reduced sales from both the reportable segments, the bottom line showed resilience through operational efficiencies.

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