Here's Why OUTFRONT Media (OUT) is an Apt Portfolio Pick
OUTFRONT Media's OUT diverse portfolio of advertising sites and large-scale presence bode well. Also, strategic investments and expansion efforts to enhance its digital-billboard portfolio provide scope to capitalize on long-term growth opportunities. However, stiff competition from its peers and high interest rates are worrisome.
OUTFRONT Media’s advertising sites are geographically diversified, with their presence across the United States and Canada. 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. Moreover, its portfolio is diversified industry-wise. The diversification makes the company’s revenues less volatile in nature. We estimate its total revenues to increase 5.3% year over year for 2023.
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 2,010 at the end of first-quarter 2023, increasing from 1,638 at the end of 2021. 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, in turn, providing scope to boost digital revenues. Our estimate indicates a 6.6% year-over-year increase in billboard revenues for 2023.
OUTFRONT Media has also capitalized on acquisitions to enhance its portfolio. In the first quarter of 2023, the company acquired assets for around $5.1 million. Moreover, in 2022, it completed acquisitions worth $353.9 million. With such expansion efforts, it remains poised to grow over the long term.
However, the company faces stiff competition from other outdoor advertisers for customers, display locations and structures. The company 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 anticipated to affect its pricing power in the market.
A high interest rate environment will likely raise borrowing costs for OUTFRONT Media, affecting its ability to purchase or develop real estate. Our estimate for the company’s 2023 interest expense indicates a rise of 22.3% year over year.
Shares of this Zacks Rank #2 (Buy) company have rallied 1.4% in the past one months, compared with the industry's growth of 2%.
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Other Stocks to Consider
Some other top-ranked stocks from the REIT sector are Ventas VTR and EastGroup Properties EGP, each presently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ventas’ 2023 funds from operations (FFO) per share has risen marginally over the past two months to $2.99.
The Zacks Consensus Estimate for EastGroup Properties’ current-year FFO per share has moved marginally north over the past two months to $7.56.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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