Harrah's Entertainment has fallen short on first quarter earnings forecasts this year, which the company says is directly attributed to unforeseen increases in operational costs in Atlantic City. Harrah's Entertainment owns four casinos in Atlantic City, including Bally's, Harrah's Atlantic City, Showboat and Caesar's. Although individual property earnings were not detailed in a recent company press release, overall performance at all four properties was not as good as forecasted.

Thomas Financial had forecasted first quarter stock prices to hit ninety-nine cents per share. However, with only a slight 1.6% raise in casino revenue earnings (amounting to $185.3 million) stock prices closed at ninety-eight cents per share at the end of the first quarter. Considering that Harrah's stockholder's have already agree to a private equity buyout by Apollo Management and Texas Pacific, investors and gaming analysts were not consulted about the company's first-quarter performance. The only reason Harrah's is still required to publicly report is because the deal has not officially closed as of yet.

Some casino gaming analysts do not just pin Harrah's performance in Atlantic City to higher operational costs. Now that Pennsylvania's casino gaming market has burst open at the seams, there is no doubt that Pennsylvania casinos and racetracks are stealing business from nearby New Jersey. There is also increased competition on the Boardwalk itself.  In Atlantic City alone, Harrah's reported nearly a 25% decrease in operational income and a 5.5% loss in cash flow, bottoming out at approximately $133 million. Overall company cash flow increase by 1.2% from 2006, to end March 31 at $698.4 million.

If it were not for Harrah's Las Vegas casino properties, the gaming conglomerate would not be seeing any positive cash flow at the moment. In fact, Las Vegas is the only casino gaming market where Harrah's has seen any positive return in the first quarter of 2007. Overall revenue was up by nearly 9% to close out at $898.6 million, while cash flow was up by 3.3% to settle at $297.6 million.