OUTFRONT Media’s (OUT - Free Report) geographically- and industry-wise diversified portfolio enables its clients to reach a national audience, making the company’s revenues less volatile in nature. However, high level of debt hampers the company’s financial flexibility.
The out-of-home (OOH) advertising industry is growing at a rapid pace compared with other forms of media. Also, its cost is lower compared with other media. Thus, OUTFRONT Media is expanding its footprint and providing a unique technology platform to marketers, in order to capitalize on OOH advertising.
Further, the company is making efforts to shift its business from traditional static-billboard advertising to digital displays. Moreover, due to restriction on permits, the industry in which OUTFRONT Media operates is characterized by high barriers to entry. This makes the company’s permits its most-prized assets and allows it to advertise out of home at each location.
Also, OUTFRONT Media has a decent balance-sheet strength and liquidity that helps it pursue growth opportunities. The company is undertaking inorganic growth initiatives to enhance its portfolio. Notably, in the first nine months of 2019, it completed a number of acquisitions, totaling $41.7 million.
However, acquisitions and development of outdoor advertising assets require huge investments, which keep the company’s expenses elevated. Notably, in the first nine months of 2019, total capital expenditure flared up 5% to $65.4 million.
OUTFRONT Media had substantial indebtedness of $2.2 billion, as of Sep 30, 2019. Presence of such high level of debt lowers the company’s financial flexibility and acts a headwind.
Moreover, the OOH advertising industry needs to comply with a number of regulations at the international, federal, state and local levels. These regulations, which might change frequently, affect the company’s business.
This Zacks Rank #3 (Hold) stock has gained 38.6% so far this year, outperforming 20.9% growth recorded by the industry.
Stocks to Consider
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Crown Castle International Corporation’s (CCI - Free Report) Zacks Consensus Estimate for 2019 FFO per share remained unchanged at $5.97 over the past month. Further, the company’s shares have gained 23.8% in the year-to-date period. It currently holds a Zacks Rank of 2.
Cousins Properties Incorporated’s (CUZ - Free Report) FFO per share estimate for the current year moved marginally north to $2.96 over the past month. Additionally, the stock has appreciated 28.9%, so far this year. The company also carries a Zacks Rank #2, currently.
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