Let Cor‘us’ entertain you; Let Cor‘us’ make you smile

Corus Entertainment (TSX—CJR.B) earned more in fiscal 2014. But since it earned less than expected and lowered its expectations for 2015, its share price fell.

Corus is expected to earn more this year and next. We also expect it to continue to raise its dividend. It has done so since fiscal 2010, when it paid 60 cents a share. The shares remain a buy for long-term price gains as well as high and rising dividends.

In the year to August 31, Corus earned $150 million, or $1.76 a share, excluding one-time items from both years. This was up by 6.7 per cent from $139 million, or $1.65 a share. Higher earnings from TV overcame lower earnings from radio. Revenue jumped thanks to acquisitions.

Corus was initially thought to have earned $1.85 a share in fiscal 2014. Since its earnings fell short, the market knocked down its shares. The company blames a poor advertising market, lower-than-expected Pay TV subscribers and slower-than-expected Canadian economic growth.

On September 1, 2013 (the first day of fiscal 2014), Corus acquired the 50 per cent interest in Teletoon it didn’t already own. On January 1, it acquired the Historia and Séries+ specialty channels. And on January 31, Corus acquired two Ottawa-based radio stations. These acquisitions increased its revenue and earnings.

President and chief executive officer John Cassaday said, “In fiscal 2014, with the successful integration of our newly acquired assets, Corus delivered double-digit revenue and segment profit growth, matching our best ever earnings and [profit] margin performance. These acquisitions were immediately accretive to earnings per share and contributed to our record-setting free cash flow.”

The acquisitions will contribute throughout fiscal 2015. Even so, Corus reduced its forecast for this year. It’s expected to earn $1.88 a share. This gives the shares an attractively-low forward price-to-earnings or P/E ratio of only 11.4 times. Next year, Corus’ earnings are expected to rise to $1.96 a share. This works out to an even better forward P/E ratio of 11 times.

Mr. Cassaday is optimistic about Corus’ outlook. He says, “Looking ahead, although we have lowered our segment profit guidance for fiscal 2015, we are encouraged that with the recent repositioning of key large market Radio stations, ongoing ratings strength of our core TV networks and our entry into new markets, we are well positioned to deliver growth.”

Since Corus’ shares are cheap, they remain a buy for long-term gains as well as high and rising dividends.


The Investment Reporter, MPL Communications Inc.
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