The coronavirus pandemic has rattled the global economy and financial markets have been subject to volatility. The outdoor advertising space has been no different. Taking this into account, OUTFRONT Media Inc. OUT recently withdrew its 2020 expectation for adjusted funds from operations (AFFO) growth, updated the previously-issued revenue guidance and detailed liquidity measures.
The company expects its first-quarter 2020 revenues to be either flat or grow in low single-digits. The company had earlier guided for a mid-single digit range growth for revenues. Moreover, the company expected 2020 AFFO growth to be in the high single-digit range.
About its liquidity position, the company intimated that it withdrew the balance amount of the $500-million revolving credit facility. In addition to the cash amount of 59.1 million as of Dec 31, 2019, the company looks to have ample liquidity and financial flexibility.
With regards to the revolving credit portion of the senior credit facilities, it is subject to a maintenance covenant that the consolidated net secured leverage ratio should not exceed 4.5 times. While before the drawdown, as of Dec 31, 2019, this ratio was 1.2 times, and adjusted for the drawdown, the ratio would have been around 2.0 times. As for the total leverage ratio of the company, it was 4.4 times as of Dec 31, 2019. Adjusted for the drawdown, the ratio would have been 5.4 times. Debt of around $500 million is next due on February 2024.
Among other measures, the company has postponed its tuck-in acquisition activity and stopped deployment of equipment in its transit franchises. Additionally, the company is also in talks to lower the rent amidst a reduction in advertising value, in certain billboard ground leases. To control its costs, the company is taking certain measures to lessen its posting, maintenance, selling, general and administrative expenses.
Due to the coronavirus pandemic, outdoor travel has taken a hit as most are compelled to stay indoors. There has been a dent in advertising values and the company’s operations and revenue growth are likely to be affected. However, the company is likely to tide through these uncertain times with its efforts to improve liquidity and geographically-diversified assets with presence in 150 markets in the United States and Canada.
Amid this, shares of this Zacks Rank #2 (Buy) company have plummeted 52.3% so far this year, while its industry declined 20.3% .You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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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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