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Outfront Media's (OUT) Q1 FFO Lags Estimates, Revenues Beat

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Outfront Media, Inc. (OUT - Free Report) reported first-quarter 2018 adjusted funds from operations (FFO) per share of 27 cents, missing the Zacks Consensus Estimate by a penny. Further, the figure came in lower than the year-ago quarter tally of 28 cents.

Results reflected weakness in the national advertising market. Further, operating expenses rose on a year-over-year basis. However, these were partially offset by higher billboard and transit revenues.

Revenues in the reported quarter came in at $337.9 million, marginally surpassing the Zacks Consensus Estimate of $337.6 million. Further, revenues rose 2.2% from the year-ago figure.

Moreover, the company’s share price increased 1.78% to $19.39 during Thursday’s regular trading session.

Quarter in Detail

Billboard revenues of $239.3 million in the reported quarter indicated a year-over-year increase of $3.3 million. Results primarily benefited from an increase in revenues from the conversion of digital billboards, acquisition of digital billboards in Canada and higher average revenues per display (yield) in U.S. Media. However, these were partially offset by lower proceeds from condemnations.

Transit and other revenues of $98.6 million increased 4.2% from the prior-year quarter. This was due to the impact of new accounting standards on Sports Marketing operating segment and rise in digital transit displays.

Operating expenses of $197.1 million inched up 2.7% year over year, mainly due to higher billboard property-lease costs, relating to New York Metropolitan Transportation Authority (MTA) billboard agreement, impact from the acquisition of digital billboards in Canada and elevated expenses associated with the Sports Marketing operating segment.

Adjusted operating income before depreciation and amortization inched up 1.2% year over year to $81.2 million.

Net cash flow, resulting from operating activities for the year ending Mar 31, 2018, came in at $62.1 million, down from $32.2 million recorded in the comparable period last year. Results were affected primarily due to the improvement in working capital items and the timing of payments made under the MTA agreement.

As of Mar 31, 2018, Outfront Media’s liquidity position comprised cash of $52.5 million, as well as $331.5 million of availability under its $430 revolving credit facility, net of $88.5 million of issued letters of credit against the revolving credit facility.

Our Take

Outfront Media is making diligent efforts to expand its digital-display portfolio. It resorted to acquisitions, swaps and conversion of traditional static-billboard displays to digital-billboard displays to focus on this low-cost out-of-home (OOH) platform. These strategic efforts bode well for its long-term growth.

However, the dreary environment in the national advertising market remains a risk. Also, seasonality of business and dependence on the prospects of advertisers are creating challenges for the company. Interest rate hikes add to its woes.

Currently, Outfront Media carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

OUTFRONT Media Inc. Price, Consensus and EPS Surprise

 

OUTFRONT Media Inc. Price, Consensus and EPS Surprise | OUTFRONT Media Inc. Quote

We are now looking forward to the earnings releases of EPR Properties (EPR - Free Report) , Jones Lang LaSalle Inc. (JLL - Free Report) and Realty Income Corp. (O - Free Report) . All of these are scheduled to report their numbers on May 8.

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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