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Here's Why You Should Retain OUTFRONT Media (OUT) for Now
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A well-diversified portfolio of advertising sites, both geographical and industry-wise, in the key markets of the United States and Canada, coupled with digital-billboard conversions, positions OUTFRONT Media (OUT - Free Report) well for growth.
OUT’s large-scale presence paves the way for its clients to reach a national audience and provides the flexibility to tailor campaigns to specific regions or markets.
The out-of-home (OOH) medium is comparatively less costly than the other media alternatives. This has been a key factor as to why the OOH advertising space is gaining traction and continues to increase its market share compared to other forms of media.
In the years to come, higher technology investments are expected to provide further support to OOH advertising. In November 2022, to harness the power of social and premium OOH assets across top-tier markets, OUTFRONT Media announced the enhancement of OUTFRONT PRIME with new social out-of-home (sOOH) capabilities.
OUTFRONT Media has also been making efforts to convert its business from traditional static-billboard advertising to digital displays. It has made strategic investments in its digital-billboard portfolio over the years. This has helped the company expand the number of new advertising relationships, providing scope to boost its digital revenues.
At the end of third-quarter 2022, its total digital billboard displays reached 1,811, increasing from 1,638 at the end of 2021. Additionally, the company built or converted 71 digital billboard displays in the United States in the nine months ended Sep 30, 2022. The numbers reflect that OUT’s efforts have paid off well, and the trend is likely to continue in the upcoming quarters.
OUT’s current cash flow growth is projected to increase significantly compared with 9.70% growth estimated for the industry. Additionally, its trailing 12-month return on equity (ROE) is 13.73% compared with the industry’s average of 4.65%. This reflects that the company is more efficient in using shareholders’ funds than its peers.
Nonetheless, OUTFRONT Media faces stiff competition from other outdoor advertisers for customers, display locations and structures, which is likely to limit the company’s pricing power in the market.
Also, rising interest rates are expected to increase borrowing costs, affecting the company’s ability to purchase or develop real estate.
Although shares of OUTFRONT Media have gained 5.7% in the past six months against its industry’s decline of 6.9%, analysts seem bearish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for OUT’s 2022 FFO per share has been unchanged over the past month, indicating an unfavorable outlook.
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $1.92.
The Zacks Consensus Estimate for Alexandria Real Estate’s 2022 FFO per share stands at $8.41.
The Zacks Consensus Estimate for Stag Industrial’s ongoing year’s FFO per share is pegged at $2.21.
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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Here's Why You Should Retain OUTFRONT Media (OUT) for Now
A well-diversified portfolio of advertising sites, both geographical and industry-wise, in the key markets of the United States and Canada, coupled with digital-billboard conversions, positions OUTFRONT Media (OUT - Free Report) well for growth.
OUT’s large-scale presence paves the way for its clients to reach a national audience and provides the flexibility to tailor campaigns to specific regions or markets.
The out-of-home (OOH) medium is comparatively less costly than the other media alternatives. This has been a key factor as to why the OOH advertising space is gaining traction and continues to increase its market share compared to other forms of media.
In the years to come, higher technology investments are expected to provide further support to OOH advertising. In November 2022, to harness the power of social and premium OOH assets across top-tier markets, OUTFRONT Media announced the enhancement of OUTFRONT PRIME with new social out-of-home (sOOH) capabilities.
OUTFRONT Media has also been making efforts to convert its business from traditional static-billboard advertising to digital displays. It has made strategic investments in its digital-billboard portfolio over the years. This has helped the company expand the number of new advertising relationships, providing scope to boost its digital revenues.
At the end of third-quarter 2022, its total digital billboard displays reached 1,811, increasing from 1,638 at the end of 2021. Additionally, the company built or converted 71 digital billboard displays in the United States in the nine months ended Sep 30, 2022. The numbers reflect that OUT’s efforts have paid off well, and the trend is likely to continue in the upcoming quarters.
OUT’s current cash flow growth is projected to increase significantly compared with 9.70% growth estimated for the industry. Additionally, its trailing 12-month return on equity (ROE) is 13.73% compared with the industry’s average of 4.65%. This reflects that the company is more efficient in using shareholders’ funds than its peers.
Nonetheless, OUTFRONT Media faces stiff competition from other outdoor advertisers for customers, display locations and structures, which is likely to limit the company’s pricing power in the market.
Also, rising interest rates are expected to increase borrowing costs, affecting the company’s ability to purchase or develop real estate.
Although shares of OUTFRONT Media have gained 5.7% in the past six months against its industry’s decline of 6.9%, analysts seem bearish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for OUT’s 2022 FFO per share has been unchanged over the past month, indicating an unfavorable outlook.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties (VICI - Free Report) , Alexandria Real Estate Equities (ARE - Free Report) and Stag Industrial (STAG - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $1.92.
The Zacks Consensus Estimate for Alexandria Real Estate’s 2022 FFO per share stands at $8.41.
The Zacks Consensus Estimate for Stag Industrial’s ongoing year’s FFO per share is pegged at $2.21.
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.