OUTFRONT Media’s (OUT - Free Report) advertising sites are geographically diversified, with presence in 150 markets in the United States and Canada. The large scale presence enables its clients to reach a national audience and also provides flexibility to tailor campaigns for specific regions or markets. However, substantial level of debt dents 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. Therefore, to capitalize on the favourable trend, OUTFRONT Media is targeting strategic acquisitions and expanding its footprint.Notably, in 2019, the company completed a number of acquisitions, totalling $69.7 million.
Further, the company is making efforts to shift its business from traditional static-billboard advertising to digital displays. The company’s increasing investing in its digital-billboard portfolio over the years will likely drive its long-term growth. In fact, the U.S digital billboard count increased to 1,121 as of Dec 31, 2019, from 957 at the end of the prior year.
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. Furthermore, OUTFRONT Media’s decent balance-sheet strength and ample liquidity allows it to pursue growth opportunities. Moreover, the trend in estimate revisions of current-year funds from operations (FFO) per share indicates a favorable outlook for the company. In fact, the Zacks Consensus Estimate for 2020 FFO per share has moved up 3.7% over the past month. Therefore, given the progress on fundamentals and positive estimate revisions, the stock has decent upside potential.
However, acquisitions and development of outdoor advertising assets require huge investments, which keep the company’s expenses elevated. Notably, 2019, total capital expenditure flared up 9.2% to $89.9 million.
Moreover, the company has a substantial indebtedness of $2.2 billion as of Dec 31, 2019. High level of debt lowers the company’s financial flexibility and acts as a headwind.
In addition, 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.
Reflecting concerns over the coronavirus outbreak and its impact on the economy, market has been very volatile. Amid this, shares of this Zacks Rank #3 (Hold) company have plummeted 70.2% so far this year, while its industry declined 28.2% .You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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Plymouth Industrial REIT’s (PLYM - Free Report) Zacks Consensus Estimate for 2020 FFO per share moved up nearly 2% to $2.08 over the past month. The stock currently holds a Zacks Rank of 2.
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