- Fed chairman implies rate cuts are on the table
- Caesars is one of the most rate-sensitive casino stocks
Caesars Entertainment (NASDAQ: CZR) was among the leaders in a Friday rally by casino stocks — one facilitated in large part by Federal Reserve Chairman Jerome Powell implying interest rate cuts could be right around the corner.
In an address from an economic summit in Jackson Hole, Wy., Powell acknowledged that while inflation and unemployment risks — major challenges to the gaming industry — linger, the time could be nearing for the central bank to alter its policy posture. He also cited potential headwinds created by US tariff policy.
The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” said Powell. “It will continue to take time for tariff increases to work their way through supply chains and distribution networks. Moreover, tariff rates continue to evolve, potentially prolonging the adjustment process.”
Shares of Caesars closed higher by 6.82% on above-average volume in what was the casino stock’s best intraday performance in more than two months.
Why Lower Rates Matter to Caesars Stock
Broadly speaking, casino stocks are correlated to Fed decisions because operators carry large debt burdens — the result of doing business in a capital-intensive industry.
Caesars is among the gaming equities most tethered to Fed policy because its debt is substantial. Its net debt stood at $11.29 billion at the end of the second quarter, down from $11.42 billion a year earlier. Underscoring Caesars’ sensitivity to interest rates are analyst estimates indicating the Harrah’s operator could save $60 million annually for every 100 basis points the central bank shaves off borrowing costs.
It’s unlikely the Fed will be that aggressive at its September meeting, but Goldman Sachs recently forecast three rate cuts before the end of this year and two more in 2026. That would likely equal 125 basis points, at a minimum, coming off Fed funds rates, implying Caesars could be on the cusp of realizing significant interest expense savings.
Lower interest rates are material to Caesars for another reason. Some investors have encouraged the company to engage in asset sales to further pare debt, but higher interest rates have been headwinds to those efforts. If rates come down, prospective buyers can attain financing at more favorable terms, potentially encouraging them to take closer looks at some Caesars assets.
Times Square Casino Update
Separately, the plan by Caesars, SL Green, Jay-Z’s Roc Nation to bring a casino hotel to New York City’s Times Square may have gotten a boost today when Jeffrey Banks, owner of Alicart Restaurant Group, endorsed the plan.
“Every restaurateur I know in the area is excited about this project,” said Banks in an interview on WOR 710’s “Mendte in the Morning.”
Banks owns multiple restaurants in New York City as well as eateries located in Caesars gaming venues in Atlantic City, NJ and Las Vegas.
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