Shares of OUTFRONT Media OUT have surged 31.8% in the past three months compared with the industry’s growth of 17.7%.
This New York-based advertising real estate investment trust’s (REIT) diverse portfolio of advertising sites and large-scale presence, efforts to bolster its digital presence and strategic acquisitions over the years have enabled it to ride the growth curve so far.
Analysts seem bullish about this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2024 funds from operations (FFO) per share has been revised 6.9% upward over the past two months to $1.70.
Image Source: Zacks Investment Research
Let us now find out the possible factors behind the surge in the stock price.
OUTFRONT Media enjoys a geographically diverse portfolio of advertising sites, with a presence across the largest markets in the United States. The company’s large-scale presence paves the way for its clients to reach a national audience and provides the flexibility to tailor campaigns to specific regions or markets. This OOH advertising company provides communication and advertising services to several transit authorities.
The company caters to various industries, including professional services, healthcare/pharmaceuticals and retail. Hence, its large-scale presence and diversified portfolio with respect to geography and industry make its revenues less volatile. We estimate a year-over-year increase of 1.2% in its total revenues for 2024.
OUT’s Digital Billboard Portfolio
OUTFRONT Media is making efforts to convert its business from traditional static billboard advertising to digital displays. This has helped the company expand the number of new advertising relationships, providing scope to boost its digital revenues.
In the first half of 2024, the company built or converted 46 new digital billboard displays in the United States. Moreover, it built, converted or replaced 4,316 digital transit and other displays in the United States in the same period. Such efforts are likely to pay off well in the upcoming period, poising it well for growth. We estimate a year-over-year increase of nearly 1% in billboard revenues in 2024.
The company has also made strategic investments in its digital billboard portfolio over the years and these investments have started reaping benefits. Its total digital billboard displays reached 1,906 at the end of the second quarter of 2024.
OUT’s Favorable OOH Advertising
The company is leveraging out-of-home (OOH) advertising, which has a lower cost compared with other forms of media, to drive its performance. In the upcoming years, higher technology investments are expected to provide further support to OOH advertising. Capitalizing on this, the company is expanding its footprint and providing unique technology platforms to marketers in order to tap growth opportunities.
OUT’s Strategic Acquisitions
OUTFRONT Media is also focused on enhancing its portfolio quality via strategic acquisitions. In the first half of 2024, the company acquired several assets for approximately $7.6 million. In 2023, it acquired several assets for around $33.7 million. With such expansion efforts, it remains well-poised to grow over the long term.
Risks Likely to Affect OUT’s Positive Trend
OUTFRONT Media faces competition from other outdoor advertisers. This is anticipated to affect the company’s pricing power in the market. Although the Federal Reserve has announced a rate cut, the interest rate is still high and is a concern for Simon Property.
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are Lamar Advertising LAMR and Four Corners Property Trust FCPT, 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 Lamar’s 2024 FFO per share is pinned at $8.09, suggesting year-over-year growth of 8.3%.
The Zacks Consensus Estimate for Four Corners’ 2024 FFO per share stands at $1.73, indicating an increase of 3.6% from the year-ago reported figure.
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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