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OUTFRONT's Asset Improvements to Combat Soft Market Concerns

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OUTFRONT Media Inc.’s (OUT - Free Report) state-of-the-art digital transformations efforts in its portfolio attract brands encouraging those to launch highly-engaging campaigns at distinct locations. However, these digital deployments involve significant costs and will likely affect the company’s bottom-line performance. 

OUTFRONT Media continues to pioneer the OOH space with innovative technologies and large-scale installation of new digital liveboard displays across its transit system. Through these efforts, the company boasts an impressive footprint across 140 markets in the United States and Canada, providing unrivalled communication between brands and audiences.

This large scale also enables its clients to reach a national audience, as well as provides the flexibility to tailor campaigns in specific regions or markets. 

Specifically, in early 2018, this real estate investment trust (REIT) started the deployment of more than 50,000 liveboards across the subway and commuter rail stations in New York, and aims to fortify its digital presence in the BART system of San Francisco in 2019.

Further, OOH advertising is growing at a rapid pace and becoming the crucial component of a campaign’s marketing mix, owing to its affordability and mass reach. Moreover, fragmentation across other advertising media and technological advancements in the OOH segment are facilitating the shift to outdoor advertising. 

Amid this favorable environment, the company continues to be on the lookout for strategic acquisitions to expand its portfolio. Furthermore, recent partnerships with The Points Guy for a New York campaign and another with Florida's Space Coast Office of Tourism highlight the company’s ability to ride on the tide.

Nevertheless, it faces stiff competition from other outdoor advertisers for customers, display locations and structures. This is anticipated to affect the company’s pricing power in the market. In addition, with less likeliness of any recovery in the lackluster national advertising market, revenues from national advertising segment might remain suppressed in the upcoming quarters. 

Additionally, a highly leveraged balance sheet amid rising rate environment remains a critical concern for OUTFRONT Media. Amid rising rates, not only the financing costs flare up, but the common-stock buyers also demand a higher dividend yield, which may negatively impact the market price of the common stock.

Lastly, the OOH advertising industry has to comply with frequently changing regulations at the international, federal, state and local levels. This could have a deeper impact on the outdoor advertising industry and OUTFRONT Media’s business.

In the past three months, shares of this Zacks Rank #3 (Hold) company has declined 3.5% compared to the 4.6% loss incurred by its industry.
 


 

Key Picks

Some better-ranked stocks from the REIT space are Lamar Advertising Company (LAMR - Free Report) , PS Business Parks, Inc. (PSB - Free Report) and Terreno Realty Corporation (TRNO - 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.

Lamar’s funds from operations (FFO) per share estimates for 2019 have been marginally revised upward to $5.89 in the past 30 days.

PS Business Parks’ Zacks Consensus Estimate for 2019 FFO per share remained unchanged at $6.58 over the past month.

Terreno Realty’s FFO per share estimates for 2019 remained unrevised at $1.39 in 30 days’ time.

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