TORONTO – Corus Entertainment Inc. has been dealt a blow by several research analysts, who have either cut their targets for the company or stopped covering it altogether.
CIBC Capital Markets said it is dropping coverage of the television and radio station owner because of the “material uncertainty” surrounding its equity value.
It does not expect Corus to be able to generate enough cash to cover its more than $1 billion in outstanding debt, for which material amounts are due in 2027 and 2028.
“Top-line softness has pressured (free cash flow), and we do not expect Corus will be able to meet its debt covenants or repay its debt without relief/restructuring,” it said in a research note.
Meanwhile, Canaccord Genuity said it has revised downward its financial estimates for the company and lowered its 12-month stock price target to 10 cents per share from 25 cents.
On Monday, Corus reported a loss attributable to shareholders of $769.9 million in its latest quarter compared with a loss of $495.1 million a year earlier.
It said it expects to have slashed 25 per cent of its full-time workforce by the end of next month since the beginning of its 2023 fiscal year.
The television and radio broadcaster has attributed an advertising slump this year in part to lingering effects from the 2023 Hollywood strikes that delayed production of key programming, along with inflationary and competitive challenges.
Last month, the company was dealt a blow with the loss of rights to key brands like HGTV, Food Network, Cooking Channel, Magnolia Network and OWN, as of the end of this year.
That came as Rogers Communications Inc. signed a multi-year deal with Warner Bros. Discovery for the Canadian rights to those popular lifestyle and entertainment brands starting Jan. 1.
“Following the announcement of the loss of the Warner Bros. Discovery content and under the new executive leadership, the Corus thesis is now very much about balance sheet management (and possible recapitalization) as well as cost restructuring,” said Canaccord analyst Aravinda Galappatthige in a note.
Co-chief executive John Gossling told analysts that on top of cost cuts related to jobs and programming that are being eliminated, Corus is also pursuing options for relief on “certain financial covenants or repayment terms” from its lenders.
“In addition to our cost reduction initiatives, we are moving at pace to finalize a revised financial plan as part of this process,” he said on the company’s earnings call.
“Corus’ future state needs to be a more sustainable business that will focus on core activities, unique brand positioning and areas where we can win.”
But on Monday, the National Bank of Canada decreased its stock price target for Corus to one cent from 25 cents.
“Based on our revised estimates … it’s hard for us to ascribe any remaining value for equity holders,” said analyst Adam Shine in a note.
Shares in the company were trading for 12 cents on Tuesday afternoon, down four cents or 22.6 per cent from its opening price.
This report by The Canadian Press was first published July 16, 2024.
Companies in this story: (TSX:CJR.B)
