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Can OUTFRONT Media (OUT) Battle Low Advertising Spend Woes?

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The coronavirus pandemic has hit outdoor travel hard as people are compelled to stay indoors, bringing in a dent in advertising values. OUTFRONT Media (OUT - Free Report) has not been spared either. The company’s second-quarter performance suffered due to the decline in demand for its services and fall in customer advertising spends.

Nevertheless, despite the still-high infection rates, people seem to be gradually adjusting to the new normal and carry on with day-to-day activities, while companies are making concerted efforts to not only remain afloat but also sail through the crisis. Amid these, the impact of the pandemic on OUTFRONT Media’s business will likely be lower for the rest of the year than in the second quarter. Also, economic activity saw further improvement in July and August.

Moreover, the company’s advertising sites are geographically diversified, with presence in 150 markets in the United States and Canada. The large scale presence enables its clients to reach a national audience and also provides flexibility to tailor campaigns for specific regions or markets.

The company has also been making strategic investments in its digital-billboard portfolio for the past few years, which are now reaping benefits. It has been making efforts to convert its business from traditional static-billboard advertising to digital displays which are helping expand the number of new advertising relationships, in turn, providing scope to boost digital revenues.

However, apart from the decline in demand and fall in customer advertising spends, the company’s huge debt position is a concern. Although the total debt to total capital of 75% improved sequentially from 80.6%, the coronavirus pandemic-induced slowdown will keep hindering revenue growth and affecting cash flow from operations in the near term.

In addition, OUTFRONT Media faces stiff competition from other outdoor advertisers as well as other media, including conventional platforms such as television, radio, print media, direct mail marketers and online, mobile & social media platforms. This might affect the company’s pricing power in the market.

Additionally, the trend in estimate revisions of 2020 funds from operations (FFO) per share does not indicate a favorable outlook as the estimate moved 5.8% south over the past 30 days.

The Zacks Rank #4 (Sell) company has outperformed its industry over the past three months. Shares of OUTFRONT Media have appreciated 8.5%, while the industry has gained 5.2% during this period. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Stocks to Consider

Alexander & Baldwin, Inc’s (ALEX - Free Report) FFO per share estimate for 2020 moved up 24% to $16.61 in the last month. The stock currently carries a Zacks Rank of 2 (Buy).

City Office REIT, Inc’s (CIO - Free Report) Zacks Consensus Estimate for the ongoing-year FFO per share moved 4.6% north to $1.14 over the past month. The stock currently carries a Zacks Rank of 2.

Duke Realty Corporation’s (DRE - Free Report) Zacks Consensus Estimate for the current year’s FFO per share moved 3.5% north to $1.49 in a month’s time. The stock currently carries a Zacks Rank of 2.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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