Corus Entertainment stock is worth a look, this investor says

Have you looked at Corus Entertainment (Corus Entertainment Stock Quote, Chart, News, Analysts, Financials TSX:CJR.B) lately? The stock has had a strong past 12 months, giving investors a double plus more over that time span. What’s up ahead for the media company remains to be seen, but portfolio manager Stephen Takacsy says after years of trouble Corus is looking a lot better.

It’s been one year to the day since markets hit their pandemic bottom, with the S&P 500 shedding a full 35 per cent between February 20 and March 23, 2020. Reaching that nadir, combined with the tremendous gains over ensuing months, will make almost any chart over the ensuing 12 months look good, and that goes for Corus as well.

Corus had been on a multi-year slide, with advertising revenues for its television and radio business suffering at the hands of a cord-cutting and streaming service-watching public. And the stock showed the wear and tear, dropping from $25 per share in 2014 to $10 by 2016 to $5.00 in 2019 and, by the time last March rolled around, down to sub-$2.00 territory.

With the markets vacating stocks left and right as the COVID-19 pandemic took hold last spring, investors were dumping Corus, fearing the worst. But as with a number of businesses initially thought to be in a downturn, Corus ended up doing better than expected during the pandemic. Indeed, viewership and engagement across Corus’ platforms rose during those months of stay-at-home existence, even as economic activity (and the advertising that comes hand-in-hand) dropped significantly.

Take the company’s fiscal 2020 delivered this past October and for the year ended August 31, 2020. There revenue slid about eight per cent year-over-year, from $1,545 million to $1,408 million, and earnings came in at a loss of $2.98 per share compared to a gain of $0.74 per share the year before.

The company then saw TV ad revenue fall a further 14 per cent over its most recently-reported quarter, Corus’ fiscal Q1 2021, reported in January. There, management said recovery in ad dollars was on the horizon but the company was still in recovery mode.

“Once again, our strong free cash flow performance has improved our financial flexibility as we remain firmly focused on delivering consolidated revenue growth year over year,” said Doug Murphy, president and CEO, in a January 12 press release.

“This promising start to the year coupled with the significant progress we are making to advance our strategic plan will position us extremely well as we emerge from the current climate as a new, stronger Corus,” Murphy said.

Now, after years of concerns over the strength of the company’s business, Corus is on solid ground again, with Takacsy saying despite the rush to Netflix, reports of the death of cable TV have been greatly exaggerated.

“Corus is a very well managed company. They’re in a fairly challenging segment where advertising revenues are challenged —mainly radio and TV— but they’ve done a really good job controlling their costs,” said Takacsy, president and CEO at Lester Asset Management, who spoke on BNN Bloomberg on Monday.

“You know, people are still watching TV and they’re still watching specialty channels even though there’s all this additional competition out there. Cord cutting was greatly exaggerated,” Takacsy said.

As for the company’s dividend, which currently sits at a yield of 3.8 per cent, Takacsy thinks it’s in good hands.

“Corus is trading at a low multiple to reflect many of [the sector’s] challenges, but I think the dividend is safe. The Shaw family still controls the company, not Shaw Communications but the family, so there’s good sponsorship there as well,” Takacsy said.

“We don’t own it currently but it may be something that we revisit in the future,” he said.

Ahead of second quarter fiscal 2021 financials due from Corus on April 9, Corus’ Q1 in January featured revenue down ten per cent year-over-year to $467.9 million with earnings coming in at $0.38 per share, which was even compared to a year earlier. Both top and bottom numbers were beats of analysts’ estimates, however, where the consensus calls were for $417.3 million in revenue and earnings of $0.31 per share.

Breaking down Corus’ revenue, the company saw its Television segment drop nine per cent year-over-year to $392 million while Radio and its more locally-focused ad sales dropped 26 per cent to $28.3 million. Corus’ assets include 15 TV broadcasting stations, 39 radio stations and 33 specialty TV services.

Corus finished its fiscal first quarter with cash and equivalents of $49.9 million compared to $45.9 million a year earlier, while the company reported its net debt to segment profit ratio as moving from 3.18x as of August 31, 2020, to 3.14x as of November 30, 2020.