Caesars Entertainment’s stock fell sharply Wednesday after the casino titan said it expects weak results in the current quarter because of fewer scheduled events and lower room rates in Las Vegas.
Caesars reported second-quarter net income of $29 million, after reporting a loss in the same period a year earlier. On a per-share basis, the Las Vegas-based company said it had profit of 4 cents. The average estimate of four analysts surveyed by Zacks Investment Research was for earnings of 1 cent per share.
While the results topped Wall Street expectations, executives rattled investors by saying on a conference call that they are seeing lower demand in Las Vegas for July and August. That triggered a selling spree that forced Caesars’ stock to be halted three times during the call, even as executives attempted to reassure industry analysts the slowdown is only temporary.
Shares in Caesars Entertainment Corp. at one point Wednesday fell more than 24 percent in trading. They ended the day down almost 15 percent at $9.63. Other casino operators also saw their stocks tumble.
The company expects third-quarter revenue per available room in Las Vegas to grow up to 2 percent and kept its full-year guidance between 4 and 6 percent.
Caesars president and CEO Mark Frissora told analysts Las Vegas will host fewer entertainment shows during the third quarter compared with the same period last year, which featured the mega-fight between Floyd Mayweather Jr. and Conor McGregor and other events that drew thousands of people to the destination. Frissora said T-Mobile Arena alone will host 21 fewer events.
“There was a very large difference in programming, which is what’s driving this softness,” Frissora said. “This is a two-month blip that ends up improving and getting back on pace.”
Frissora also explained that Caesars is facing room-rate pressure from “similar” competitors, and in some cases, has had to match those rates.
“And so there are people on the (Las Vegas) Strip that are obviously pricing rates at a lower level and we can’t control that,” he said. “So, in order for us to keep our occupancy up, you know, we have to beat competition.”
The agency responsible for promoting the destination on Tuesday reported that revenue per available room on the Strip in June came in at $115.36, a 4.3 percent decrease compared with the same month last year. The average daily room rate on the Strip was $125.94, down 1.6 percent.
Caesars posted revenue of $2.12 billion in the period, also exceeding Street forecasts. Four analysts surveyed by Zacks expected $2.1 billion.
Analysts with Stifel said Caesars’ third quarter revenue-per-available-room guidance “effectively spooked gaming investors.”
“Given the big run the space as a whole has had over the past several years, we believe investors could be using the (Caesars’) commentary to take profits, all else equal,” they wrote.