Harrah's Profit Doubles on Booming Casino Business

Casino operator Harrah's Entertainment Inc. (HET) Wednesday said fourth-quarter profit more than doubled on booming business in Las Vegas and its acquisition of the Horseshoe casinos.

Harrah's, which is buying Caesars Entertainment Inc. (CZR) in a $5 billion deal that would make it the world's largest gambling operator, said net income jumped to $77.0 million, or 68 cents per share, from $35.4 million, or 32 cents a share, a year earlier. The stock jumped 2 percent in early trading.

Earnings included a contribution of 15 cents per share from Harrah's Tunica (search) and Harrah's East Chicago (search), two casins earned 72 cents a share, 5 cents better than the average estimate of analysts polled by Reuters Estimates.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 31.3 percent to $288.7 million. Revenue rose 25 percent to $1.19 billion, below analysts' expectations of $1.22 billion.

Bear Stearns analyst Joe Greff reaffirmed a "outperform" rating on the shares, citing "the benefits of the Caesars acquisition, attractive valuation, generally decent operating results across most of its portfolio, and a relative under-appreciation of (these three items)."

Harrah's, which focuses on older gamblers, expects the Caesars acquisition to close in the second quarter. Harrah's is in "substantial compliance" with the Federal Trade Commission's (search) second request for information about the deal, Chief Executive Gary Loveman said in a statement Wednesday.

If approved by regulators, the acquisition would catapult Harrah's to one of the top spots in Las Vegas.

Harrah's said casino EBITDA rose 26.1 percent to $90.7 million in its Western region, centered in Las Vegas.

Harrah's shares gained $1.41 to $65.22 Wednesday on the New York Stock Exchange (search). The stock has risen more than 40 percent in the past five months, hitting a 52-week high of $67.25 on Dec. 31.

North Central and South Central region profits also increased, bolstered by the Horseshoe casinos acquisition, which added about 4 cents a share to earnings.

North Central EBITDA rose 56.9 percent to $93.8 million, and South Central EBITDA gained 64.9 percent to $50.8 million.

Eastern region EBITDA fell 10.3 percent to $52.2 million, hurt by a month-long strike at Harrah's Atlantic City and Showboat properties, the longest strike in the history of Atlantic City gaming. Members of the UNITE-HERE union approved a five-year contract in November.

On Tuesday, Harrah's increased the size of its bank credit facilities to $4 billion from $2.5 billion.

"The recently announced increase in our bank-credit capacity will not only facilitate the Caesars transaction but provide us with the financial flexibility to pursue other opportunities as they arise," Loveman said.