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Outfront Media (OUT) Up 27% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Outfront Media (OUT - Free Report) . Shares have added about 27% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Outfront Media due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

OUTFRONT Media Q3 FFO Beats, Revenues Miss Estimates

OUTFRONT Media delivered third-quarter 2020 adjusted FFO per share of 19 cents, outpacing the Zacks Consensus Estimate of 12 cents. In the prior-year quarter, the company had reported adjusted FFO per share of 64 cents.

The company’s third-quarter results reflect a decline in operating expenses and selling, general and administrative expenses. However, a fall in revenues on dwindling demand for its services is a concern.

Particularly, tevenues came in at $282.3 million for the third quarter, missing the Zacks Consensus Estimate of $284.7 million. The revenue figure also plunged 39% year over year.

In the reported quarter, the company sold its sports marketing business.

Quarter in Detail

Billboard revenues came in at $239.9 million, indicating a year-over-year fall of 23.1%. This downside resulted from lower average revenue per display, referred to as yield. Transit and other revenues of $42.4 million slumped 71.8%, year on year. The decline was mainly due to the fall in yield, sale of the company’s sports marketing business and a drop in third-party digital equipment sales.

OUTFRONT Media reported an operating income of $25.1 million in the third quarter, tanking 70.6% from the prior-year quarter.

Operating expenses of $155.8 million plunged 36.5% year over year. This mainly resulted from lower transit franchise expense, decreased posting, maintenance and other expenses, and a drop in billboard property lease expense.

Balance Sheet

Net cash flow, resulting from operating activities for the third quarter ended Sep 30, 2020, came in at $86 million, plummeting 46.9% year on year. This primarily reflects the negative impact of a decrease in net income.

As of Sep 30, 2020, OUTFRONT Media had a solid liquidity position, which comprised unrestricted cash of $690.6 million and $498.4 million of availability under its $500-million revolving credit facility, net of $1.6 million of issued letters of credit. During the third quarter, the company sold no shares under its at-the-market (ATM) equity program and had $232.5 million available under its the program at quarter end.

Q4 Outlook

The company forecasts total revenues to be in the low 30% range in the fourth quarter . This is primarily due to increasing revenues from billboard displays and an improvement in local and national revenues.

The company has increased its capital expenditure guidance for the current year from $50 million to $55 million due to increase in digital billboard investments.

The company expects capital expenditure in the range of $70-$80 million for the next year mainly due to digital billboard investments.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -6.12% due to these changes.

VGM Scores

Currently, Outfront Media has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Outfront Media has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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