Live Nation Entertainment, which has faced a rollercoaster 2010, has said its prospects for 2011 are greatly improved, but financial ratings company Standard & Poor’s is not buying it and this week lowered its outlook for the concert and ticketing giant.
S&P lowered the outlook from “positive” to “stable,” in part due to Live Nation’s disappointing third quarter but also its belief that 2011 will present Live Nation with challenges over debt and other issues.
“The outlook revision is based on weaker operating performance in the key third quarter ended Sept. 30, 2010, increasing debt leverage, and the narrowing margin of compliance with bank debt covenant levels,” Hal Diamond, a credit analyst with Standard & Poor’s, said in a statement. Despite the lowered outlook, S&P retained its corporate credit rating of the company at “B+.”
Net income for Live Nation’s third quarter was down to $51.5 million, a 26 percent drop, and the company warned that its new projection for its net income for the year would be only about $385 million, more than $50 million off its previous projection.
At the end of Live Nation’s second quarter, ended June 30, the company’s long-term debt was $1.7 billion, and soon after President and CEO Michael Rapino announced steps to shore up investor confidence and improve its financial picture moving forward.
Rapino said that the company was looking at paying artists less in upfront guaranteed payments starting in 2011. In addition, the company has stepped up its online efforts, such as signing up as the ticket provider for Apple’s new Ping social media initiative, and it recently bought French ticketing company Ticketnet.
The moves appear to have helped the company’s stock, which earlier in the year saw a big drop but has steadily risen throughout the fall. Shares trade under the symbol LYV, and as of about 1:45 p.m. EDT today, December 2, the price had climbed to $11.28, up from the previous close of $10.90, and up from $9.71 a month earlier.
Yet, nagging at Live Nation is the fact that for many fans, the economy has not yet rebounded to the point that they feel comfortable buying tickets and attending more shows. A blue chip slate of artists are expected to tour in 2011, according to Live Nation Executive Chairman Irving Azoff, including U2, Van Halen, Kenny Chesney and Christina Aguilera. But, whether those tours will generate the big dollars that the company hopes remains to be seen, which is playing into S&P’s reduced outlook.
Ben Mogil, director of Equity Research for media and entertainment at investment bank Stifel, Nicolaus & Company, told TicketNews that S&P’s move will not affect his “hold” rating of the company.
Mogil spelled out several challenges Live Nation faces in 2011, including the need to renew some venue leases, and the uncertainty of sponsorship going forward.
“[Ratings] downgrades matter more than outlooks,” Mogil said.