National Bank Reiterates its Sector Perform Rating on CJRNational Bank Notes Corus Entertainment Q4 Revenue in Line, EBITDA Misses Elevated Street; Shares Fall
2022-10-21 11:10:49 AM ET (MT Newswires)
11:10 AM EDT, 10/21/2022 (MT Newswires) -- National Bank of Canada said Friday Corus Entertainment Inc. (CJR-B.TO), which was down 12% at last look, met revenue expectations for Q4 after the Sept. 9 warning on TV advertising but its EBITDA missed elevated Street forecasts.
The bank noted Corus reported a 6% year-on-year drop in revenue to $340 million for Q4, compared with its forecast of $342 million and consensus at $344 million.
Adjusted EBITDA at $56 million was in line with the bank's forecast of $57 million but below consensus at $71 million. Adjusted EPS loss of $0.08 missed the bank's estimate of $0.02 loss and consensus of $0.01 net income.
The bank noted that Corus had warned six weeks ago about softening TV ad demand in Q4 and in near term to start fiscal 2023. This has a material impact on operating leverage, with margins already being undermined by higher TV programming costs.
The bank noted that TV revenue fell 6.5% and EBITDA dropped 46.4% as expenses rose 13% and ad sales fell 14.2% due to changing consumer behaviour amid recessionary concerns and supply change issues. Radio revenue was up 0.1% but EBITDA fell 59.9% with expenses rising 12.3%, the bank noted. Weaker airtime revenue was mitigated by digital ad gains, it said.
The bank also noted that the company's leverage was up at 3.0x, above the target of sub-2.5x. This could slow the company's share buybacks under the normal course issuer bid, the bank said, noting that Corus repurchased 2.9 million shares in Q4.
National Bank reiterated its Sector Perform rating on Corus and the target price of $3.25 but said recessionary risks persist.