A month has gone by since the last earnings report for Outfront Media (OUT). Shares have lost about 6.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Outfront Media due for a breakout? 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 Misses Q1 AFFO Mark on Higher Expenses
OUTFRONT Media reported first-quarter 2023 adjusted FFO (AFFO) per share of 5 cents, missing the Zacks Consensus Estimate of 16 cents. The figure was also lower than the prior-year quarter’s tally of 23 cents.
Results reflected higher operating expenses and interest expenses in the quarter.
Nonetheless, quarterly revenues of $395.8 million surpassed the Zacks Consensus Estimate of $383.8 million and climbed nearly 6% year over year. Higher billboard revenues contributed to this rise.
Quarter in Detail
During the reported quarter, billboard revenues were $320.6 million, reflecting year-over-year growth of 7.5%. The upside resulted mainly from the impact of new and lost billboards in the period, inclusive of acquisitions, higher proceeds from condemnations, and a rise in average revenues per display (referred to as yield).
The company’s transit and other revenues of $75.2 million decreased marginally from the year-ago quarter. This was primarily due to a fall in yield arising from weaker market conditions in national advertising and the impact of foreign currency exchange rates, partly offset by the impact of a new transit franchise contract.
OUTFRONT Media’s operating income totaled $10.2 million in the first quarter, plunging 64.2% from the year-ago quarter’s $28.5 million.
Operating expenses were $235.5 million, which increased 10.7% year over year. The rise was mostly due to an out-of-period adjustment of $5.2 million recorded in the first quarter, related to variable billboard property lease expenses and costs associated with higher billboard revenues. Also, greater guaranteed minimum annual payments to the New York Metropolitan Transportation Authority were a contributing factor.
Net interest expenses of $37.7 million increased from $30.7 million in the prior-year period, mainly due to higher interest rates than the year-ago quarter and a greater average debt balance. The weighted average cost of debt as of Mar 31, 2023, was 5.4% compared with 4.3% in the prior-year period.
Cash Flow & Balance Sheet
Net cash flow provided by operating activities for the three months ended Mar 31, 2023, was $9.4 million, which declined from $20.5 million in the prior-year period.
As of Mar 31, 2023, OUTFRONT Media’s liquidity position comprised unrestricted cash of $42.8 million and $493.6 million of availability under its $500 million revolving credit facility, net of $6.4 million of issued letters of credit.
In the reported quarter, the company sold no shares of its common stock under its at-the-market (ATM) equity program. It had $232.5 million available under the ATM program at the quarter’s end.
How Have Estimates Been Moving Since Then?
Estimates revision followed a downward path over the past two months.
At this time, Outfront Media has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outfront Media has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Outfront Media belongs to the Zacks REIT and Equity Trust - Other industry. Another stock from the same industry, SL Green (SLG), has gained 5.1% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.
SL Green reported revenues of $174.59 million in the last reported quarter, representing a year-over-year change of +27.9%. EPS of -$0.63 for the same period compares with $1.65 a year ago.
For the current quarter, SL Green is expected to post earnings of $1.34 per share, indicating a change of -28.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.8% over the last 30 days.
SL Green has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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