Outfront Media (OUT) Beats Q3 FFO And Revenue Estimates

Outfront Media, Inc. (NYSE:OUT) reported third-quarter 2018 funds from operations (FFO) per share of 60 cents, surpassing the Zacks Consensus Estimate by a whisker. Further, the figure came in higher than the year-ago tally of 56 cents.

Per management, the company witnessed robust growth in local-advertising revenues during the Sep-end quarter. In addition, digital transformations continue to drive top-line growth. However, operating expenses flared up on a year-over-year basis.

Revenues in the reported quarter came in at $414.2 million, comfortably surpassing the Zacks Consensus Estimate of $405.1 million. The top line also climbed 3.2% from the year-ago figure.

Quarter in Detail

Billboard revenues of $290.6 million in the quarter under review indicate a year-over-year increase of $18.2 million. Results primarily benefited from growth in revenues from the conversion of digital billboards and higher average revenues per display (yield) in U.S. Media. However, these were partially offset by lower proceeds from condemnations.

Transit and other revenues of $123.6 million were up $3.6 million from the prior-year quarter. The upside resulted from growth in digital transit displays and benefits from adopting new accounting standards in the Sports Marketing operating segment.

Operating expenses of $215.3 million inched up 1.3% year over year, mainly due to the impact of new accounting standards in the Sports Marketing operating segment resulting in elevated posting, maintenance and other expenses. This was partly muted by lower transit franchise expenses, relating to the company’s New York Metropolitan Transportation Authority (MTA) transit agreement.

Operating income edged down 1.7% year over year to $78.9 million.

Net cash flow, resulting from operating activities for the nine-month period ending Sep 30, 2018, came in at $137.4 million, down from $182.6 million recorded in the comparable period last year. Results were affected primarily due to prepaid equipment deployment costs under the MTA agreement.

As of Sep 30, 2018, Outfront Media’s liquidity position comprised unrestricted cash of $56.7 million and $353.9 million of availability under its $430 revolving credit facility, net of $66.1 million of issued letters of credit. The company also has an unused $300 million in its at-the-market equity offering program.

Our Take

Outfront Media has been increasingly investing in its digital-billboard portfolio over the past few years. For this, the company has resorted to acquisitions, swaps and conversion of traditional static-billboard displays to digital-billboard displays to focus on low-cost out-of-home (OOH) platform. These strategic efforts have started reaping benefits.

Nonetheless, there is seasonality in the company’s business. It also faces intense competition from other outdoor advertisers. Interest rate hikes add to its woes.

Currently, Outfront Media carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Stocks in the Same Space

Cousins Properties Incorporated (NYSE:CUZ) reported third-quarter 2018 FFO per share of 16 cents, beating the Zacks Consensus Estimate by a whisker. Furthermore, the figure came in higher than the prior-year tally of 15 cents.

Highwoods Properties Inc. (NYSE:HIW) reported third-quarter 2018 FFO of 86 cents per share, beating the Zacks Consensus Estimate. Additionally, the figure remained flat year over year.

Ventas, Inc. (NYSE:VTR) reported third-quarter 2018 normalized FFO of 99 cents, beating the Zacks Consensus Estimate of 97 cents. However, the figure came in lower than the year-ago quarter tally of $1.04.

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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