On Monday, RBC Capital adjusted its price target for Corus Entertainment (CJR/B:CN) (OTC: OTC:CJREF), dropping it to Cdn$0.30 from the previous Cdn$0.50. Despite this change, the firm maintained a Sector Perform rating on the stock.
Corus Entertainment is embarking on a major restructuring process, aiming to enhance profitability and free cash flow (FCF). This restructuring includes the elimination of approximately 300 positions in the fourth quarter of 2024. This reduction is part of a larger initiative that has seen around 800 roles cut since the beginning of fiscal 2023, amounting to about 25% of the company's workforce. These cuts are anticipated to result in annualized cost savings of approximately Cdn$80 million to Cdn$85 million.
Additionally, Corus is optimizing its asset mix, which involves rationalizing its television channels and radio stations, as well as adjusting content investments to create sustainable audiences. These changes are designed to address an expected Cdn$40 million year-over-year increase in programming costs at Global in the first quarter of 2025.
However, there remain several uncertainties, or "known unknowns," that could impact the company's future. These include potential legal actions concerning the non-renewal with Warner Bros. Discovery (NASDAQ:WBD), the effectiveness of channel rebranding efforts starting January 1, 2025, as a replacement for HGTV and Food Network, and the ability of Corus to secure further regulatory relief and funding. The company is exploring approximately Cdn$200 million in new funding from streamers starting in fiscal 2025 and around Cdn$100 million in local news funding from Google (NASDAQ:GOOGL).
The outlook for television advertising revenue, particularly in the typically robust first quarter, remains uncertain. Management has indicated that they expect television advertising to decline year-over-year in the fourth quarter of 2024, similar to the 14.7% decrease experienced in the third quarter, with projections for the first quarter of 2025 being too premature to determine.
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