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Outfront Media (OUT) Up 7.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Outfront Media (OUT). Shares have added about 7.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Outfront Media due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

OUTFRONT Media Q4 FFO & Revenues Beat Estimates

OUTFRONT Media delivered fourth-quarter 2020 adjusted FFO per share of 35 cents, outpacing the Zacks Consensus Estimate of 27 cents. In the prior-year quarter, the company had reported adjusted FFO per share of 73 cents.

The company’s fourth-quarter results reflect a decline in operating expenses, and selling, general and administrative expenses. However, a decline in revenues on dwindling demand for its services is a concern.

Revenues came in at $335.8 million for the fourth quarter, beating the Zacks Consensus Estimate of $318 million. However, the revenue figure plunged 31.2% year over year.

Jeremy Male, chairman and chief executive officer of OUTFRONT Media, noted that "Digital billboards returned to growth, helping drive total revenues above our expectations, with good flow-through to cash flow."

For full-year 2020, the company reported adjusted FFO of $96.3 million, down from $334.1 million a year ago. Revenues declined to $1.24 billion from $1.78 billion reported in the prior year.

Quarter in Detail

Billboard revenues came in at $279.3 million, indicating a year-over-year fall of 13%. This downside resulted from lower average revenues per display (referred to as yield) due to the pandemic’s impact on customer advertising expenditures and overall demand for the company’s services.

Transit and other revenues of $56.5 million slumped 66.2%, year on year. The decline was mainly due to the fall in yield because of the pandemic’s impact on customer advertising expenditures and overall demand for the company’s services, and sale of the company’s sports marketing operating segment.

OUTFRONT Media reported an operating income of $39.5 million in the fourth quarter, tanking 59.7% from the prior-year quarter.

Operating expenses of $176.2 million plunged 31.1% year over year. This mainly resulted from lower transit franchise expenses, decreased posting, maintenance and other expenses, and a drop in billboard property lease expenses.

Balance Sheet

Net cash flow, resulting from operating activities for the year ended Dec 31, 2020, came in at $130.6 million, plummeting 52.8% year on year. This primarily reflects the negative impact of a decrease in net income.

As of Dec 31, 2020, OUTFRONT Media had a solid liquidity position, which comprised of unrestricted cash of $710.4 million and $498.4 million of availability under its $500-million revolving credit facility, net of $1.6 million of issued letters of credit. During the fourth quarter, the company sold no share under its at-the-market (“ATM”) equity program and had $232.5 million available under its ATM program at quarter end.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -800% due to these changes.

VGM Scores

At this time, Outfront Media has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Outfront Media has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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