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Outfront Media's (OUT) Q3 FFO, Revenues Beat Estimates

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Outfront Media Inc.’s (OUT - Free Report) third-quarter 2016 adjusted funds from operations (“FFO”) per share of 63 cents exceeded the Zacks Consensus Estimate of 53 cents as well as the prior-year quarter figure of 50 cents.

Revenues for the quarter came in at $382.8 million, which was slightly above the Zacks Consensus Estimate of $382 million. However, revenues declined 1.0% from the year-ago tally of $386.7 million.

Billboard revenues of $270.5 million in the quarter denoted a decline of 2.8% year over year, reflecting the disposition of the company's outdoor advertising business in Latin America. However, the negative was partly mitigated by an uptick in average revenue per display (yield) and increased revenues from the conversion of static billboards to digital.

On the other hand, transit and other revenues increased 3.6% from the prior-year quarter to 112.3 million. Results were attributable to the solid U.S. market conditions in local advertising, the impact of an acquisition, and the net effect of won and lost franchises. However, sale of the company’s outdoor business in Latin America and a reduction in national advertising revenues acted as dampeners.

Quarter in Detail

Operating income during the reported quarter was $63.5 million, up 20.5% from $52.7 million recorded in the year-ago quarter. Operating expenses of $201.5 million declined 3.7% from a year ago, mainly due to the disposition of Latin America business.

Adjusted operating income before depreciation and amortization rose 6.0% year over year to $120.7 million. Net cash flow resulting from operating activities for the nine-month period ending Sep 30, 2016 came in at $200.7 million, up from $176.4 million in the comparable prior-year period.

As of Sep 30, 2016, Outfront’s liquidity position comprised cash of $73.1 million as well as $393.3 million of availability under its $425.0 million revolving credit facility, net of $31.7 million of issued letters of credit against the revolving credit facility.   

Segment Performance

Notably, the company has three operating segments, namely U.S. Billboard and Transit, which is included in the U.S. Media reportable segment, International and Sports Marketing, which are included in Other.

During the quarter, revenues at the U.S. media came in at $356.7 million, highlighting an increase of 3.0% from a year ago. Rise in local revenues, an increase in average revenue per display (yield) and conversion of static billboards to digital attributed to this increase.

On the other hand, at the Other segment, revenues plummeted 35.4% year over year to $26.1 million as a result of disposition of Latin America and lower performance in Canada. This was partly offset by solid results in the company’s sports marketing operating segment.

Excluding stock-based compensation, corporate costs during the quarter were $10.8 million, down by $0.8 million from the prior-year quarter.

Our Take

Going forward, the company’s huge diversity, both industry-wise and geographical, efforts to convert from traditional static billboard displays to digital billboard displays and low cost out-of-home platform augur well. However, cutthroat competition, dependence on the prospects of advertisers and any rise in interest rates remain concerns.

Outfront currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

OUTFRONT MEDIA Price, Consensus and EPS Surprise


OUTFRONT MEDIA Price, Consensus and EPS Surprise | OUTFRONT MEDIA Quote

Investors interested in the REIT industry may consider stocks like Duke Realty Corp. (DRE - Free Report) , Mack-Cali Realty Corp. (CLI - Free Report) and Ventas, Inc. (VTR - Free Report) . Each of these stocks carries a Zacks Rank #2 (Buy).

Duke Realty has experienced upward revision in full-year 2016 estimates in the past two months while Mack-Cali has long-term expected growth rate of 6.4% against the industry average of 5.9%. Further, Ventas came up with an earnings surprise of 1.98% in the recently reported quarter.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. All EPS numbers presented in this write up represent FFO per share.

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