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Should Investors Retain OUTFRONT Media (OUT) Stock for Now?
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OUTFRONT Media (OUT - Free Report) is well-poised to benefit from its diversified portfolio of advertising sites, both regional and industry-wise, in the key markets of the United States and Canada.
The company’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.
Recently, OUT extended its support through the Partnership for New York City's new "We ♥ NYC " citywide civic action campaign.
The company, through its exclusive digital transit advertising, will engage commuters utilizing digital signage throughout the NYC transit system (subway, bus, street furniture, billboards), which reaches millions of people daily (roughly 5 million trips daily across subways, buses and commuter rail).
Moreover, given the technological advancements and low-cost nature of out-of-home (OOH) advertising compared with other forms of media, it has been growing at a rapid pace and continues to increase its market share.
In the upcoming years, higher technology investments are expected to provide further support to OOH advertising. Therefore, OUTFRONT Media’s efforts to provide a unique technology platform for marketers to tap growth opportunities bode well.
In March 2023, OUT announced that the direct-to-consumer hosiery brand, Sheertex, will launch a new OOH campaign for its impossibly strong sheer tights. This new campaign – anchored by the phrase 'Really Strong Tights' – is a follow-up to Sheertex's successful 2022 'Alarmingly Strong Tights' campaign with the company.
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.
Its total digital billboard displays reached 1,970 at the end of fourth-quarter 2022, increasing from 1,638 at the end of 2021. For 2023, we anticipate billboard revenues to increase 4.1% year over year.
Also, the company’s strategic acquisitions to enhance portfolio quality are encouraging. In 2022, it completed buyouts worth $353.9 million.
OUT’s current cash flow growth is projected to increase 62.20% compared with 11.88% growth estimated for the industry. Additionally, its trailing 12-month return on equity (ROE) is 12.13% compared with the industry’s average of 3.77%. 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. Our estimate for 2023 interest expenses indicates a rise of 16.6% year over year.
Shares of this Zacks Rank #3 (Hold) company have lost 4.3% in the past three months against its industry’s growth of 1.2%.
The Zacks Consensus Estimate for Alexandria Real Estate’s 2023 FFO per share is pegged at $8.95.
The Zacks Consensus Estimate for Terreno Realty’s current-year FFO per share is stands at $2.17.
The Zacks Consensus Estimate for Service Properties Trust’s 2023 FFO per share is pegged at $1.89.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Should Investors Retain OUTFRONT Media (OUT) Stock for Now?
OUTFRONT Media (OUT - Free Report) is well-poised to benefit from its diversified portfolio of advertising sites, both regional and industry-wise, in the key markets of the United States and Canada.
The company’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.
Recently, OUT extended its support through the Partnership for New York City's new "We ♥ NYC " citywide civic action campaign.
The company, through its exclusive digital transit advertising, will engage commuters utilizing digital signage throughout the NYC transit system (subway, bus, street furniture, billboards), which reaches millions of people daily (roughly 5 million trips daily across subways, buses and commuter rail).
Moreover, given the technological advancements and low-cost nature of out-of-home (OOH) advertising compared with other forms of media, it has been growing at a rapid pace and continues to increase its market share.
In the upcoming years, higher technology investments are expected to provide further support to OOH advertising. Therefore, OUTFRONT Media’s efforts to provide a unique technology platform for marketers to tap growth opportunities bode well.
In March 2023, OUT announced that the direct-to-consumer hosiery brand, Sheertex, will launch a new OOH campaign for its impossibly strong sheer tights. This new campaign – anchored by the phrase 'Really Strong Tights' – is a follow-up to Sheertex's successful 2022 'Alarmingly Strong Tights' campaign with the company.
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.
Its total digital billboard displays reached 1,970 at the end of fourth-quarter 2022, increasing from 1,638 at the end of 2021. For 2023, we anticipate billboard revenues to increase 4.1% year over year.
Also, the company’s strategic acquisitions to enhance portfolio quality are encouraging. In 2022, it completed buyouts worth $353.9 million.
OUT’s current cash flow growth is projected to increase 62.20% compared with 11.88% growth estimated for the industry. Additionally, its trailing 12-month return on equity (ROE) is 12.13% compared with the industry’s average of 3.77%. 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. Our estimate for 2023 interest expenses indicates a rise of 16.6% year over year.
Shares of this Zacks Rank #3 (Hold) company have lost 4.3% in the past three months against its industry’s growth of 1.2%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are Alexandria Real Estate Equities (ARE - Free Report) and Terreno Realty (TRNO - Free Report) , each currently carrying a Zacks Rank #2 (Buy), and Service Properties Trust (SVC - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Alexandria Real Estate’s 2023 FFO per share is pegged at $8.95.
The Zacks Consensus Estimate for Terreno Realty’s current-year FFO per share is stands at $2.17.
The Zacks Consensus Estimate for Service Properties Trust’s 2023 FFO per share is pegged at $1.89.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.