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The yield on the 10-year Treasury note, which helps set the interest rates for corporate loans, dropped slightly today. This provides a small amount of relief for companies with high debt levels that need to be refinanced or paid down.
For a company like Caesars, which carries about 11.9 billion dollars in debt, the cost of borrowing is a major factor in its ability to turn a profit. While this small move does not change the company's overall debt burden, any cooling in interest rates makes it easier for the business to manage its interest payments and focus cash on its casino operations.
Source: CNBC
The interest rate on 30-year US government bonds has reached its highest level since 2001. When these rates rise, it generally makes it more expensive for companies to borrow money or refinance the debt they already have.
This matters for Caesars because the company carries a heavy debt load of about 11.9 billion dollars. Since a major part of our view on the stock depends on the company using its cash to pay down that debt, higher borrowing costs across the economy could make that process slower and more expensive.
TD Cowen has lowered its rating on the company to Hold. This change comes just after the company reported its second-quarter results and confirmed it is being acquired by billionaire Tilman Fertitta. When a stock is downgraded to Hold, it often means the analyst sees limited room for the price to go up from here or believes the upcoming acquisition price has already been factored in.
The company reported a loss of 30 cents per share, which was worse than the small profit analysts expected. Total revenue reached about 3 billion dollars, up slightly from last year. While regional casinos saw growth, revenue from Las Vegas properties fell about 3.5 percent. This is a key area to watch because these iconic resorts carry high fixed costs and need high occupancy to stay profitable.
The digital division, which includes online sports betting and gaming, brought in 68 million dollars in adjusted earnings. This is a slight drop from last year but shows the online business is still contributing cash. The results were overshadowed by the news that the company has agreed to be acquired by Tilman Fertitta for 5.7 billion dollars, which likely sets a ceiling for the stock price in the near term.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
The company has a habit of reporting losses that are wider than analysts expect, missing its profit targets in seven of the last eight quarters.
| Expectation | |
|---|---|
| EPS | $-0.07 |
| Revenue | $2.98B |
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