I'm not sure whether to like Harrah's Entertainment (NYSE:HET) or hate it.
In the fourth quarter, Harrah's grew revenues 3.6% year over year to $1.04 billion. Cross-market play jumped 19.1%, which helped boost results from the company's two Las Vegas properties. However, overall property EBITDA (earnings before interest, taxes, depreciation, and amortization -- a profitability metric by which capital-intensive casinos are often measured) fell 3.2% to $237.3 million, and adjusted EPS fell 7.4% to $0.50.
Dragging results, EBITDA at Harrah's Atlantic City fell 10% on a 5.8% decline in revenues, largely due to the entry of MGM Mirage (NYSE:MGG) and Boyd Gaming's (NYSE:BYD) Borgata casino this past summer. Thanks, in part, to the absurd tax rate in Illinois, EBITDA at the three Illinois/Indiana casinos fell 24.8%. It would have been even worse without Harrah's East Chicago (in Indiana) contributions.
The tax situation also hit other players in Illinois markets, including Argosy (NYSE:AGY), Mandalay Resort Group (NYSE:MBG), Penn National (NASDAQ:PENN), and Boyd.
Harrah's shares were down 5% to $51 midday following the earnings announcement. At that price, the stock trades at an enterprise value roughly eight times 2003 EBITDA -- reasonable given the company's strong financial position and low cost of capital, as well as its growth prospects.
Harrah's may not dominate most of its markets, but I think it has the best marketing around, plus a solid business strategy and decisive management. There are things to like about a company that has done much to improve its competitive positioning, though not necessarily with value in mind. (The acquisition of Jack Binion's Horseshoe Gaming, for example, took care of a competitor, but I'm still not convinced that Harrah's will derive real value from it.)
Still, whether I like Harrah's or hate it, I simply can't love it -- at least not at this price.
Like it or hate it? Tell us on the Harrah's Entertainment and Vegas, Baby, Vegas! discussion boards --only at Fool.com. Jeff Hwang owns shares of Ameristar Casinos, and can be reached here.
