A well-diversified portfolio of advertising sites, both geographic and sectoral, in key markets of the United States and Canada, coupled with digital billboard conversions, positions OUTFRONT Media (OUTSIDE – Free report) good for growth.
OUT’s large-scale presence paves the way for its clients to reach national audiences and provides the flexibility to tailor campaigns to specific regions or markets.
Out-of-home (OOH) media is comparatively cheaper than other alternative media. This has been a key factor in why the OOH advertising space is gaining momentum and continuing to increase its market share compared to other forms of media.
In the coming years, greater investments in technology are expected to further support OOH advertising. In November 2022, to harness the power of social and premium OOH assets in leading markets, OUTFRONT Media announced the enhancement of OUTFRONT PRIME with new social display (sOOH) capabilities.
OUTFRONT Media has also been working to convert its traditional static billboard advertising business to digital displays. It has made strategic investments in its digital billboard portfolio over the years. This helped the company increase the number of new advertising relationships, which in turn increased its digital revenue.
At the end of the third quarter of 2022, the total number of digital billboards reached 1,811, compared to 1,638 at the end of 2021. In addition, the company built or converted 71 digital billboards in the United States at for the nine months ended September 30, 2022. The figures show that OUT’s efforts have paid off and the trend is expected to continue in the coming quarters.
OUT’s current cash flow growth is expected to increase significantly from the 9.70% growth estimated for the industry. Additionally, its 12-month return on equity (ROE) is 13.73%, compared to an industry average of 4.65%. This reflects the fact that the company is more efficient in using shareholder funds than its peers.
Nevertheless, OUTFRONT Media faces fierce competition from other OOH advertisers for customers, locations and display structures, which is likely to limit the company’s pricing power. on the market.
Additionally, rising interest rates are expected to increase borrowing costs, affecting the company’s ability to purchase or develop real estate.
Although shares of OUTFRONT Media have gained 5.7% in the past six months against a 6.9% drop in its industry, analysts appear bearish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for 2022 FFO per share of OUT has remained unchanged over the past month, indicating an unfavorable outlook.
Image source: Zacks Investment Research
Actions to consider
Some higher ranked stocks in the REIT sector are VICI properties (VICI – free report), Alexandria Real Estate Stocks (ARE – free report) and industrial deer (STAG – Free Report), each carrying a Zacks Rank #2 (Buy). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks consensus estimate for VICI Properties’ FFO per share for the current year is set at $1.92.
The Zacks consensus estimate for 2022 FFO per Alexandria Real Estate share stands at $8.41.
Zacks consensus estimate for Stag Industrial’s FFO per share for the current year is set at $2.21.
Note: Everything related to earnings presented in this description represents funds from operations (FFO) – a metric widely used to assess the performance of REITs.