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Eldorado’s Earnings Slide In Third Quarter But Stocks Rise

Eldorado Resorts has been making a lot of headlines lately, mainly since it is set to acquire Caesars Entertainment in one of the biggest mergers the industry has ever seen. Although their third quarter wasn’t really that good finance-wise, their stocks remained strong nevertheless.

The earnings report arrived on Wednesday and displayed a total of $663.18 million for Q3 of 2019. When converted to shares, this turned out to be approximately $0.47 per share, which is much less than predicted by Wall Street analysts, who believed shares would be approximately $0.62.

Moreover, the expected turnover was about $647.72, which is a bit more than what has been reported.

Eldorado has received all approvals to proceed with the takeover of Caesars and conduct a deal that is reportedly estimated at $17.3 billion. The only thing that needs to be done before the acquisition takes place is for shareholders of both companies to get together and vote on the issue. They are expected to meet next week, and if all goes well, we will be able to witness one of the biggest mergers in history.

Getting Ready

The plan conducted by Eldorado’s officials to get the money for the merger is to get rid of some of their non-core assets. This mainly includes venues such as Cape Girardeau, Mountaineer, and Caruthersville, which will bring them approximately $385 million.

On the other hand, Caesars is also on its way to get rid of a venue — it’s selling Rio Las Vegas for the total amount of $510 million. With all of these things taken into account, it seems Eldorado wouldn’t have to borrow that much money in order to make the acquisition happen.

Once all things are put together, it seems that Eldorado will manage to achieve a more positive free flow of cash, which is something that investors welcomed. The company traded at $46.88 on Wednesday, and that continued to rise until the markets closed.

The price had gone up to $50.40 later in the week, and it is approaching quickly to the highest price of 2019, which was $53.27.

Therefore, it seems that Eldorado was not affected by the fact that it had a revenue slip recently. In fact, it has remained pretty strong, especially when compared to its competitors.

Optimistic View

Union Gaming’s (UG) John DeCree said that “the return to high-single-digit same-store EBITDAR growth” was approximately 2x the rate of which most of the peers of Eldorado have been growing.

DeCree is also very positive when it comes to the future of Eldorado after the merger with Caesars Entertainment takes place. He said that the target price of Eldorado’s stocks could possibly reach $70.

DeCree stated that the merged company would be able to create various “value creation opportunities.” Some of such opportunities, according to him, include partnerships with sports betting companies such as William Hill, and underutilized land located on the Las Vegas Strip.

The merger is one step away from being executed, and Eldorado’s officials seem to have taken the right steps to get the most out of it. If all goes as planned and the company acquires Caesars, it would be the biggest casino operator in the US with an unparalleled offer.

If it continues to make the right moves, the merged company will have a bright future ahead of it.

However, let’s not jump the boat and see how the merger will affect the industry and what would change in the days to come. First step — shareholders voting on the merger next week!