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Outfront Media (OUT) Q2 FFO and Revenues Miss Estimates

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Outfront Media, Inc. (OUT - Free Report) reported second-quarter 2018 adjusted funds from operations (FFO) per share of 55 cents, missing the Zacks Consensus Estimate of 57 cents. Further, the figure came in lower than the year-ago tally of 56 cents.

The company’s results reflect lower transit and other revenues resulting from dreary environment in national advertising. Further, the revenue figure missed the Consensus mark. However, operating expenses declined on a year-over-year basis.

Revenues in the reported quarter came in at $401.7 million, missing the Zacks Consensus Estimate of $406 million. Nevertheless, the top line inched up 1.4% from the year-ago figure.

Quarter in Detail

Billboard revenues of $280.4 million in the quarter under review indicate a year-over-year increase of $6.2 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 $121.3 million decreased marginally from the prior-year quarter. The downside resulted from fall in national advertising revenues, partially mitigated by growth in digital transit displays.

Operating expenses of $212 million went down 0.6% year over year, mainly due to lower transit franchise expenses, relating to the New York Metropolitan Transportation Authority (MTA) billboard agreement. However, the impact was partially offset by the acquisition of digital billboards in Canada and elevated expenses associated with the Sports Marketing segment.

Adjusted operating income, before depreciation and amortization, climbed 2.6% year over year to $125.2 million.

Net cash flow, resulting from operating activities for the six months ending Jun 30, 2018, came in at $68.2 million, down from $79.1 million recorded in the comparable period last year. Results were affected primarily due to prepaid expenses under the MTA agreement, partially offset by improvement in working capital items.

As of Jun 30, 2018, Outfront Media’s liquidity position comprised cash of $41.7 million and $295.2 million of availability under its $430 revolving credit facility, net of $65.8 million of issued letters of credit. The company also has an unused $300.0 million at-the-market equity offering program.

Our Take

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

Nonetheless, the dreary environment in the national advertising market remains a concern. Additionally, there is seasonality in the company’s business. It also faces intense competition from other outdoor advertisers.  Interest rate hikes add to its woes.

OUTFRONT Media Inc. Price, Consensus and EPS Surprise

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

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.

Performance of Stocks in the Same Space

Cousins Properties Incorporated (CUZ - Free Report) reported second-quarter 2018 FFO per share of 15 cents, in line with the Zacks Consensus Estimate. The reported figure came in lower than the prior-year quarter tally of 16 cents. Decline in revenues remained a negative factor.

Mack-Cali Realty Corp’s (CLI - Free Report) core FFO per share of 45 cents came in lower than the year-ago figure of 60 cents.  However, it surpassed the Zacks Consensus Estimate by a cent. The company’s revenues witnessed a 22.2% decline year over year.

Highwoods Properties Inc. (HIW - Free Report) reported second-quarter 2018 FFO of 87 cents per share, marginally beating the Zacks Consensus Estimate. However, the figure compares unfavorably with the year-ago tally of 90 cents. Decline in same-property cash net operating income led to the downfall.

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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