OUTFRONT Media Stock: Price of 7%-Yielder Popped on Strong Results
April 1, 2024
Why Investors Should Take a Look at OUT Stock
Because of quarantine orders during the COVID-19 pandemic, advertising companies took a big hit. Many businesses were closed, so the need for billboards and other out-of-home (OOH) and digital advertising platforms evaporated.
Suffice it to say, with the 2020 health crisis in the rearview mirror and businesses competing for customers, the demand for smart advertising campaigns has exploded, and that’s been a boon for OUTFRONT Media Inc (NYSE:OUT).
The company is a specialty real estate investment trust (REIT) that provides advertising space on OOH structures and sites in the U.S.
The company’s inventory consists of digital billboards, traditional print billboards, street furniture, transit advertising, massive canvas ads on buildings, “place-based” media (ads at locations such as airports, shopping centers, subway stations, and parking garages), and mobile ads (ads sent to cell phones and other mobile devices). (Source: “OOH Media Solutions,” OUTFRONT Media Inc, last accessed March 27, 2024.)
Creative OOH advertising has usurped direct mail and traditional media models and is projected to become the sole traditional media format that experiences growth. OOH advertising has some of the highest recall rates of all advertising formats. (Source: “2024 Advertising Trends Report,” OUTFRONT Media Inc, last accessed March 27, 2024.)
OOH ads have the following statistics:
- 7.2% higher growth than any other traditional advertising format
- $9.1 billion in projected U.S. OOH ad spending in 2024
- 88% of adults recall seeing an OOH ad in the past 30 days
- 85% of adults look at OOH ads either all, most, or some of the time
- Four times higher efficiency than digital video or broadcast TV ads
- Average product sales of $5.97 for every dollar spent on OOH ads
Q4 2023 Revenues at High End of Guidance
OUTFRONT Media Inc’s business continues to recover from the pandemic, with back-to-office policies helping juice advertising campaigns.
For the fourth quarter of 2023, the company’s revenues inched up by 1.3% year-over-year to $501.2 million. Its billboard revenues went up by 3.1% year-over-year to $389.1 million, while its transit and “other” revenues decreased by 4.4% year-over-year to $112.1 million. (Source: “OUTFRONT Media Reports Fourth Quarter and Full Year 2023 Results,” OUTFRONT Media Inc, February 21, 2024.)
Its fourth-quarter net income grew by two percent year-over-year to $60.4 million, or $0.35 per diluted share. Its funds from operations (FFO) slipped by 3.6% year-over-year to $99.3 million, while its adjusted FFO increased by 12.5% year-over-year to $108.1 million.
OUTFRONT Media Inc’s chairman and CEO, Jeremy Male, noted, “We were pleased to finish the year with our fourth quarter revenues at the higher end of guidance as a result of strength in our local business and automated sales channels, which offset the headwind created by the media strikes.” (Source: Ibid.)
He added, “While it is still early in 2024, our business is accelerating and we expect that OUTFRONT, and the entire out-of-home industry, will benefit from a strong media market this year.”
Management Declared Quarterly Dividend of $0.30 Per Share
The COVID-19 crisis wreaked havoc on Wall Street in 2020, including for OUT stock.
The company suspended its quarterly dividend after paying $0.38 per share in early 2020 and reinstated it at $0.10 per share in the second half of 2021. Management tripled the payout to $0.30 per share in early 2022 and has held it at that level since then. (Source: “Dividend History,” OUTFRONT Media Inc, last accessed March 27, 2024.)
That works out to a yield of 7.37% (as of this writing).
OutFront Media Stock Has Doubled Since Bottoming in October
In terms of share price, OUT stock has thumped the broader market, advancing 105% since bottoming in early October 2023. Since I wrote about OUTFRONT Media stock in December 2023, it has rallied by an impressive 35% (as of this writing).
Why the big gains?
REITs like OUTFRONT Media Inc became a lot more attractive after the Federal Reserve announced in early November 2023 that it was pausing its interest rate hikes. Then, in December, the Fed held its key lending rate in the range of 5.25% to 5.5% and said it would begin cutting its rates in 2024.
REITs have faced a lot of pressure from high interest rates. That’s because REITs borrow a lot of capital to grow their portfolios. Now that interest rates are expected to fall, REITs won’t have to spend as much money servicing their debts.
It doesn’t hurt that OUTFRONT Media Inc has been recovering from the pandemic and has been reporting solid revenue growth and earnings, as well as announcing strong guidance.
Even with OUT stock’s triple-digit gains over the last five months, Wall Street analysts remain bullish on the stock. They’ve provided a 12-month share-price forecast of $18.00. This points to potential upside of 7.5%.
Chart courtesy of StockCharts.com
The Lowdown on OUTFRONT Media Inc
OUTFRONT Media is a specialty REIT that operates OOH billboards and mobile advertising campaigns across the U.S. While the company’s operations took a hit during the pandemic, they’ve improved significantly since then, with fourth-quarter 2023 revenues coming in at the high end of guidance.
OUTFRONT Media Inc’s management expects the company’s business to accelerate in 2024, fueled by a strong media market. While income investors wait to see if this comes to pass, they can take advantage of OUTFRONT Media stock’s reliable, high-yield distributions.
