Analysts cut Park Place estimates after Caesars shake-up

Friday, Sept. 7, 2001 | 10:48 a.m.

Two Wall Street gaming analysts cut their earnings estimates for Park Place Entertainment Corp., following news that Caesars Palace President John Shigley had resigned.

"We believe the management change at Caesars Palace Las Vegas is an indication that there may be risk to our estimates," wrote Robin Farley, gaming analyst for UBS Warburg. "Our concerns center on the table side of the business ... we believe that hotel and slot operations have been in line with expectations."

The concerns were shared by Lehman Bros. gaming analyst Joyce Minor, who cited "recent management turmoil at Caesars Palace Las Vegas ... and continuing weakness in Tunica (Miss.) and Northern and Southern Nevada" as grounds for lowered estimates.

Two other general managers have left Park Place properties in recent months -- Mike Caryl, head of Caesars Tahoe; and Rhett Long, general manager of the Reno Hilton. In both cases, the departures were linked to disappointing financial performances, Farley noted.

Farley lowered her 2001 cash flow estimate for Caesars Palace from $117 million to $108 million, which would represent a 9 percent decline from 2000 levels. Farley also lowered her third-quarter earnings per share estimate for Park Place from 19 cents to 17 cents per share, and the full-year estimate from 58 cents to 56 cents per share.

"We expect Park Place to eventually bring in more high-end oriented management at Caesars Palace when a permanent president is named," Farley wrote. John Groom, named senior vice president of Park Place on Wednesday, will serve as interim president of Caesars Palace.

Minor lowered her third-quarter estimate to 15 cents per share, a decrease of 3 cents per share, her fourth-quarter estimate from 7 cents to 6 cents per share, and her year 2001 estimate from 65 cents to 60 cents. Minor also reduced her third-quarter Park Place cash flow estimate to $308 million, a 9 percent decrease.

In its Wednesday announcement, Park Place gave no reason for Shigley's departure. Shigley was the second general manager to resign at the property so far this year.

Park Place stock fell 3 percent to $10.23 Thursday on unusually heavy volume. Heavy trading continued today, and the stock lost an additional 3 percent in morning trading. By early afternoon, it traded at $9.92, down 31 cents on the day.