Caesars Entertainment (NASDAQ:CZR) released its quarterly report on Wednesday night, and the stock fell back by about 3% after the release in after-hours trading after having risen by more than 14% in the ordinary session. Coming on the heels of a big debt-restructuring announcement last night, Caesars' quarterly results were largely disappointing, showing the big gulf between it and rivals Las Vegas Sands (NYSE:LVS) and Wynn Resorts (NASDAQ:WYNN). But even within the U.S. gambling market, Caesars Entertainment's results showed the wide gulf between conditions in Las Vegas versus other parts of the country.

Source: Caesars Palace.

Caesars Entertainment saw its quarterly loss widen by 77% from year-ago levels, resulting in a $2.82 per share net loss on a 2% drop in overall revenue. That stands in stark contrast to Las Vegas Sands and Wynn Resorts, which posted strong quarterly growth. The difference is that Caesars Entertainment lacks exposure to the Asian gaming capital of Macau, which has been the primary growth driver for Wynn Resorts and Las Vegas Sands, and so Caesars has had to deal with the much larger challenges in the domestic market.

A tale of two markets
Overall, Caesars' results were poor on nearly all fronts. Casino revenues fell 8.6%, cutting income from operations in half. Losses from continuing operations more than doubled during the quarter.

But Caesars did comment on the contrast between the Las Vegas market and other parts of the country. CEO Gary Loveman called Las Vegas "a bright spot with strength in the hospitality categories," and he remains "excited about Caesars' prospects in Las Vegas." Room revenue climbed more than 10%, with average daily rates paid for rooms sold jumping by $20 to $113 per room. Entertainment revenue also climbed in Las Vegas. All told, Caesars' Vegas results included gains of 5.6% in net revenue and a 23% jump in operating income.

Elsewhere, though, Caesars didn't enjoy nearly as much success. Severe weather played a major role in holding back business in most parts of the country, and Caesars cited greater competition in other regions and generally weak conditions in markets beyond Nevada. Gaming volumes fell everywhere but in Vegas. In the Atlantic Coast region, which includes Atlantic City and Philadelphia, revenue fell almost 14% on a $44 million drop in casino revenues, and operating losses widened dramatically from year-ago levels. In its Other U.S. segment, which includes casinos in the broader Mississippi River basin and the Gulf Coast as well as Laughlin and Lake Tahoe, operating income plunged by almost three-quarters, sending sales down 6.7%. Internationally, Caesars has limited exposure presently, with the company having closed its Golden Nugget casino in England permanently as of February. Loveman hasn't ruled out other possible closures, including possibly reducing the number of Atlantic City casinos it currently operates.

Passage to Asia?
Caesars hasn't given up on the international realm, though. In March, South Korea granted approval to Caesars for a casino resort, working in conjunction with Indonesian company Lippo Group to build the property near Seoul's Incheon International Airport. Caesars hopes to have the resort ready in time for South Korea's hosting of the 2018 Winter Olympics, and given that South Korea had previously rejected applications for the resort, the news was especially welcome for Caesars.

Yet with so much debt, Caesars desperately needs to work on strengthening its balance sheet. With that goal in mind, Caesars said yesterday that it had sold off a 5% stake in its Caesars Entertainment Operating Co. subsidiary to a group of institutional investors. The move has the legal effect of taking away guarantees on a big portion of the parent company's extensive debt, and although bondholders have questioned whether some of Caesars' restructuring moves are legitimate, Caesars hopes that by moving forward, it will be able to get a stronger handle on its debt maintenance and deal with its operating challenges.

Looking forward, Caesars needs Vegas to keep climbing and for its South Korea foray to go well. Otherwise, poor earnings elsewhere could end up leaving Caesars shareholders holding a losing hand.

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