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Here's Why You Should Retain OUTFRONT Media (OUT) Stock Now
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OUTFRONT Media (OUT - Free Report) is well-poised to benefit from its diversified portfolio of advertising sites, both geographical and industry-wise, in the key markets of the United States and Canada. Moreover, strategic investments and expansion efforts to enhance its digital billboard portfolio augur well for its long-term growth opportunities. However, competition from other advertising channels and elevated expenses are worrisome for the company. A high interest rate environment adds to its concerns.
What’s Aiding It?
OUTFRONT Media’s advertising sites are geographically diversified, with a presence across the 25 largest markets in the United States and 150 markets in the United States and Canada. The large-scale presence enables its clients to reach a national audience and also provides the flexibility to tailor campaigns to specific regions or markets.
Moreover, the company’s portfolio is diversified industry-wise. The diversification makes its revenues less volatile in nature. We estimate the total revenues to increase 1.9% and 1.7% year over year in 2024 and 2025, respectively.
OUTFRONT Media has been making strategic investments in its digital billboard portfolio over the years, and these investments have started reaping benefits. Its total digital billboard displays reached 2,227 at the end of the first quarter of 2024, up from 1,970 at the end of 2022.
Moreover, the company’s efforts to convert its business from traditional static billboard advertising to digital displays help in the expansion of the number of new advertising relationships, providing scope to boost digital revenues. We estimate a year-over-year increase of 2.1% in billboard revenues in 2024.
To enhance its portfolio, OUTFRONT Media has also capitalized on acquisitions. In the first quarter of 2024, the company acquired several assets for nearly $6 million. In 2023, the company acquired several assets for around $33.7 million. Moreover, in 2022, it completed acquisitions worth $353.9 million. With such expansion efforts, the company remains poised to grow over the long term.
Moreover, given the technological advancements and low-cost nature of out-of-home (OOH) advertising compared with other forms of media, OUT has been growing at a rapid pace and continues to increase its market share. In the upcoming years, higher technology investments are expected to provide further support to OOH advertising. Therefore, OUTFRONT Media’s efforts to provide a unique technology platform for marketers to tap into growth opportunities bode well.
Over the past six months, shares of this Zacks Rank #3 (Hold) company have risen 11.7% against the industry’s decline of 2.8%.
Image Source: Zacks Investment Research
What’s Hurting It?
However, given the current macroeconomic scenario, the company is experiencing an increase in expenses. Our estimate for the company’s total operating expenses indicates a year-over-year increase of 2.9% and 4.3% in 2024 and 2025, respectively. This is likely to weigh upon the company’s bottom-line growth in the near term.
A high interest rate environment is likely to keep borrowing costs elevated for OUTFRONT Media, affecting its ability to purchase or develop real estate. Its total debt as of Mar 31, 2024, was $2.8 billion. We expect the company’s net interest expenses to increase 7.1% year over year in the second quarter of 2024. Further, with high interest rates still in place, the dividend payout might seem less attractive than the yields on fixed-income and money market accounts.
Moreover, the company faces competition from other outdoor advertisers for customers, display locations and structures. It also competes with other media, including conventional platforms such as television, radio, print media, direct mail marketers and online, mobile & social media platforms. This is likely to weigh on the company’s pricing power in the market, affecting profitability.
The Zacks Consensus Estimate for American Tower’s 2024 FFO per share is pegged at $10.39, which suggests 5.27% year-over-year growth.
The Zacks Consensus Estimate for Lamar Advertising’s 2024 FFO per share of $8.03 indicates a 7.5% increase year over year.
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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Here's Why You Should Retain OUTFRONT Media (OUT) Stock Now
OUTFRONT Media (OUT - Free Report) is well-poised to benefit from its diversified portfolio of advertising sites, both geographical and industry-wise, in the key markets of the United States and Canada. Moreover, strategic investments and expansion efforts to enhance its digital billboard portfolio augur well for its long-term growth opportunities. However, competition from other advertising channels and elevated expenses are worrisome for the company. A high interest rate environment adds to its concerns.
What’s Aiding It?
OUTFRONT Media’s advertising sites are geographically diversified, with a presence across the 25 largest markets in the United States and 150 markets in the United States and Canada. The large-scale presence enables its clients to reach a national audience and also provides the flexibility to tailor campaigns to specific regions or markets.
Moreover, the company’s portfolio is diversified industry-wise. The diversification makes its revenues less volatile in nature. We estimate the total revenues to increase 1.9% and 1.7% year over year in 2024 and 2025, respectively.
OUTFRONT Media has been making strategic investments in its digital billboard portfolio over the years, and these investments have started reaping benefits. Its total digital billboard displays reached 2,227 at the end of the first quarter of 2024, up from 1,970 at the end of 2022.
Moreover, the company’s efforts to convert its business from traditional static billboard advertising to digital displays help in the expansion of the number of new advertising relationships, providing scope to boost digital revenues. We estimate a year-over-year increase of 2.1% in billboard revenues in 2024.
To enhance its portfolio, OUTFRONT Media has also capitalized on acquisitions. In the first quarter of 2024, the company acquired several assets for nearly $6 million. In 2023, the company acquired several assets for around $33.7 million. Moreover, in 2022, it completed acquisitions worth $353.9 million. With such expansion efforts, the company remains poised to grow over the long term.
Moreover, given the technological advancements and low-cost nature of out-of-home (OOH) advertising compared with other forms of media, OUT has been growing at a rapid pace and continues to increase its market share. In the upcoming years, higher technology investments are expected to provide further support to OOH advertising. Therefore, OUTFRONT Media’s efforts to provide a unique technology platform for marketers to tap into growth opportunities bode well.
Over the past six months, shares of this Zacks Rank #3 (Hold) company have risen 11.7% against the industry’s decline of 2.8%.
Image Source: Zacks Investment Research
What’s Hurting It?
However, given the current macroeconomic scenario, the company is experiencing an increase in expenses. Our estimate for the company’s total operating expenses indicates a year-over-year increase of 2.9% and 4.3% in 2024 and 2025, respectively. This is likely to weigh upon the company’s bottom-line growth in the near term.
A high interest rate environment is likely to keep borrowing costs elevated for OUTFRONT Media, affecting its ability to purchase or develop real estate. Its total debt as of Mar 31, 2024, was $2.8 billion. We expect the company’s net interest expenses to increase 7.1% year over year in the second quarter of 2024. Further, with high interest rates still in place, the dividend payout might seem less attractive than the yields on fixed-income and money market accounts.
Moreover, the company faces competition from other outdoor advertisers for customers, display locations and structures. It also competes with other media, including conventional platforms such as television, radio, print media, direct mail marketers and online, mobile & social media platforms. This is likely to weigh on the company’s pricing power in the market, affecting profitability.
Stocks to Consider
Some better-ranked stocks from the REIT sector are American Tower (AMT - Free Report) and Lamar Advertising (LAMR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for American Tower’s 2024 FFO per share is pegged at $10.39, which suggests 5.27% year-over-year growth.
The Zacks Consensus Estimate for Lamar Advertising’s 2024 FFO per share of $8.03 indicates a 7.5% increase year over year.
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.