OUTFRONT Media Soars 16.4% YTD: Will the Trend Last?

Shares of OUTFRONT Media OUT have soared 16.4% year to date compared with the industry's growth of 3.2%.

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.

This month, the company reported better-than-expected second-quarter 2024 results. It reported adjusted funds from operations (AFFO) per share of 49 cents, which surpassed the Zacks Consensus Estimate of 46 cents. The figure increased 4.3% on a year-over-year basis. Results reflected lower operating expenses due to lower property lease costs. It also witnessed higher average revenue per display across its portfolio.

Analysts seem bullish about this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2024 funds from operations (FFO) per share has revised 6.9% upward over the past month to $1.70.

Image Source: Zacks Investment Research

Let us now find out the factors behind the surge in the stock price and check whether this trend will last.

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.

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 six months ended Jun 30, 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.

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.

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.

OUTFRONT Media is also focused on enhancing its portfolio quality via strategic acquisitions.  In the six months ended Jun 30, 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.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Cousins Properties CUZ and Lamar Advertising LAMR, each carrying a Zacks Rank #2 (Buy) at present.

The Zacks Consensus Estimate for Cousins Properties' 2024 FFO per share is pinned at $2.66, suggesting year-over-year growth of 1.5%.

The Zacks Consensus Estimate for Lamar Advertising's 2024 FFO per share stands at $8.09, indicating an increase of 8.3% 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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