Caesars’ Entertainment outlook improves

Wednesday, March 10, 2004 | 11:07 a.m.

SUN STAFF AND WIRE REPORTS

Caesars Entertainment Inc. of Las Vegas, the largest U.S. casino company, today said profit will be as much as 19 cents a share in the first quarter, more than it expected, because it's charging higher hotel room rates in Las Vegas and winning more from gamblers.

The company previously forecast profit, excluding items including results from the Las Vegas Hilton that is being sold, of 11 cents to 13 cents. Full results will be reported April 22, Las Vegas-based Caesars said in a statement.

Chief Executive Wallace Barr added new restaurants and an area for singers Celine Dion and Elton John at its Caesars Palace property, attracting more visitors and enabling the company to raise room rates. Gamblers also are wagering more money, with the casinos winning a higher percentage of the time, Caesars said.

Shares of Caesars rose 58 cents to $13.30 at 10:08 a.m. in New York Stock Exchange composite trading. They had risen 90 percent in the past year.

Analyst Joe Greff of Fulcrum Global Partners today raised his corporate earnings estimate on the news.

"We continue to believe that (Caesars) is a transition/turnaround story with an improving risk-reward profile," Greff wrote in a research note. "It's really the only value stock left among the larger cap gaming operators."

Tuesday, casino analyst Todd Scott of Morgan Stanley downgraded shares of Caesars to "equal weight" from "overweight," saying shares had topped his previous estimate.

"At our price target, Caesars would be trading at just over 22 times 2005 (earnings estimates). This multiple is above the group's current trading level of 20 times," Scott wrote in a research note.

Scott said the company has some "potential upside" from casino management contracts struck with Indian tribes, a hotel tower expansion in Atlantic City, international expansion into the United Kingdom or Macau and dividend payments "which could begin as early as 2006."