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Here's Why It is Wise to Hold OUTFRONT Media (OUT) Stock Now

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OUTFRONT Media Inc. (OUT - Free Report) has a geographically diversified portfolio of advertising sites 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 offers flexibility to tailor campaigns for specific regions or markets.

Though OUTFRONT Media’s transit business has lower margins, its diversity, both industry wise and geographical, makes the company’s revenues less volatile in nature. Its success is also backed by high customer retention. Over the past three years, the company has witnessed 100% retention of the top 10 customers and 79% of the top 1000.

Further, OUTFRONT Media 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, opening up scope to boost digital revenues. It has been increasing investments in its digital-billboard portfolio over the years which will likely drive long-term growth. The U.S digital billboard count increased to 1200 as of Sep 30, 2020, from 957 at the end of 2018.

In addition, OUTFRONT Media has capitalized on acquisitions to enhance its portfolio. The company completed acquisitions of $15.5 million in the first three quarters of the current year. With such expansion efforts, it is well poised to grow over the long term.

Additionally, the trend in estimate revisions of 2020 funds from operations (FFO) per share indicates a favorable outlook as the estimate moved 2% upward over the past 30 days.

Nevertheless, the coronavirus pandemic has hit outdoor travel as people are compelled to stay indoors, depressing advertising values. The company’s third-quarter performance was affected by the decline in demand for its services and fall in customer advertising spends. Though the situation has improved from the onset of the pandemic, any significant turnaround is unlikely in the near term given the current choppiness in the economy and the unresolved health crisis.

Furthermore, OUTFRONT Media’s debt position is a concern. The total debt to total capital of 66.2% at the end of the third quarter deteriorated sequentially. Additionally, the coronavirus pandemic-induced slowdown will continue to impede revenue growth and affect cash flow from operations in the near term.

Also, this Zacks Rank #3 (Hold) company has underperformed its industry over the past year. Shares of OUTFRONT Media have depreciated 25.2%, while the industry has lost 4.2% during this period.


Stocks to Consider

Arbor Realty Trust, Inc.’s (ABR - Free Report) FFO per share estimate for 2020 moved up 11.7% to $1.62 in the last month. The stock carries a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

City Office REIT, Inc.’s (CIO - Free Report) Zacks Consensus Estimate for the ongoing-year FFO per share moved 2.6% upward to $1.17 in the past month. The stock currently carries a Zacks Rank of 2.

Extra Space Storage Inc.’s (EXR - Free Report) Zacks Consensus Estimate for the current year’s FFO per share moved 1.2% north to $5.02 in a month’s time. The stock holds a Zacks Rank of 2, at present.

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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