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Here's Why You Should Retain Caesars Entertainment (CZR) Stock

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Caesars Entertainment, Inc. (CZR - Free Report) will likely benefit from solid Las Vegas performance, expansion projects and strategic partnerships. However, a decline in traffic from pre-pandemic levels is a concern.

Let us discuss the factors that highlight why investors should retain the stock for the time being.

Factors Driving Growth

Caesars Entertainment has been benefiting from solid Las Vegas performance. In the second quarter of 2022, the company delivered encouraging revenues and adjusted EBITDA. During the quarter, net revenues in the segment were $1,142 million compared with $855 million in the year-ago quarter. The segment’s adjusted EBITDA totaled $547 million compared with $423 million in the prior-year quarter. The upside was primarily driven by a rise in hotel occupancy (97%) and higher gaming, food and beverage volumes. The company is optimistic about booking trends, owing to increased bookings for group and convention room nights. It expects an uptrend in bookings to sustain in 2022 and beyond.

The company focuses on expansion projects to drive growth. During the second quarter of 2022, the company stated progress regarding the construction of its new hotel tower and additional entities at the New Orleans property and room remodel program in Atlantic City. CZR anticipates opening its land-based facility in Lake Charles and expanding its casino offering in Pompano in December 2022. Given the improving group and convention trends in Las Vegas coupled with the return of the international consumers, the company anticipates the development projects to boost return on the investment in the upcoming periods. In the third quarter of 2022, the company anticipates breaking ground on Caesars Danville (in Virginia), Harrahs' Columbus (in Nebraska) and its casino expansion for Harrah's Hoosier Park.

Caesars Entertainment continues to focus on partnerships to drive growth. To this end, the company entered into the exclusive naming-rights partnership to rebrand the Superdome in New Orleans as the Caesars Superdome. It has formed partnerships with the NFL, NBA, NHL and MLB and is the exclusive odds provider for ESPN and CBS Sports. The company intends to create new partnerships among collegiate and professional sports teams. The selection of such partnerships provides the company with exclusivity to access certain professional sports leagues and teams, sporting event facilities and sports television networks for tickets, suites and advertising, marketing and promotional and sponsorship opportunities.

Concerns

Zacks Investment Research
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Shares of Caesars Entertainment have declined 55.8% in the past year compared with the industry’s fall of 37.7%. The dismal performance was mainly due to the coronavirus crisis. During the second quarter of 2022, the company reported disruptions in operations (within Regional segment) concerning renovations and capital projects at Harrah’s New Orleans and Atlantic City properties. Also, it witnessed increased competition from the opening of a new casino resort in Gary, IN. Although most properties are now open, traffic is lower than pre-pandemic levels. Given the uncertainty around the crisis, chances of operational restrictions (imposed by governmental authorities), reimposing stay-at-home orders and travel restrictions cannot be ruled out.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the Zacks Consumer Discretionary sector are Marriott Vacations Worldwide Corporation (VAC - Free Report) , Hyatt Hotels Corporation (H - Free Report) and Choice Hotels International, Inc. (CHH - Free Report) .

Marriott Vacations sports a Zacks Rank #1. VAC has a trailing four-quarter earnings surprise of 13.9%, on average. The stock has declined 6.4% in the past year.

The Zacks Consensus Estimate for VAC’s current financial year sales and earnings per share (EPS) indicates an increase of 19.7% and 131.4%, respectively, from the year-ago period’s reported levels.

Hyatt carries a Zacks Rank #2. H has a trailing four-quarter earnings surprise of 798.8%, on average. The stock has increased 21.8% in the past year.

The Zacks Consensus Estimate for H’s current financial year sales and EPS indicates growth of 89.1% and 113%, respectively, from the year-ago period’s reported levels.

Choice Hotels carries a Zacks Rank #2. CHH has a trailing four-quarter earnings surprise of 11.2%, on average. The stock has declined 5.6% in the past year.

The Zacks Consensus Estimate for CHH’s current financial year sales and EPS indicates growth of 25.3% and 21.7%, respectively, from the year-ago period’s reported levels.

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