Outfront Media (OUT) Q4 FFO Beats Estimates, Revenues Up Y/Y

Outfront Media, Inc. OUT reported fourth-quarter 2017 adjusted funds from operations (FFO) per share of 60 cents, surpassing the Zacks Consensus Estimate of 56 cents. Further, the figure came in higher than the year-ago quarter tally of 56 cents.

Results indicate higher local sales across billboard and transit, benefit from acquired digital billboards in Canada as well as the conversion of static billboards to digital.

Revenues for the quarter came in at $401.3 million, missing the Zacks Consensus Estimate of $404.7 million. However, revenues rose 1% from the year-ago figure.

For full-year 2017, adjusted FFO per share came in at $2.00, 6.1% lower than the year-ago figure of $2.13. Nonetheless, revenues for the full year came in at $1.52 billion, up nearly 0.4% from $1.51 billion reported in 2016.

Quarter in Detail

Billboard revenues of $276.4 million in the quarter indicated a marginal year-over-year decrease of $0.1 million. Results were primarily affected by a drop in average revenue per day (yield) and the net impact of new and lost billboards in the period. However, these were partially offset by an increase in revenues from the conversion of digital billboards and acquisition of digital billboards in Canada.

Transit and other revenues of $124.9 million increased 3.3% from the prior-year quarter. This was due to the net impact of franchises that were won and lost in the period, partly offset by a decrease in yield.

Operating expenses of $217.4 million inched up 1% year over year, mainly due to higher transit franchise expenses relating to Massachusetts Bay Transportation Authority transit contract, impact from the acquisition of digital billboards in Canada and elevated expenses associated with the Sports Marketing operating segment. These were offset to some extent by lower transit franchise expenses under the terms of the new transit franchise agreement with New York Metropolitan Transportation Authority (MTA).

Adjusted operating income before depreciation and amortization inched up 3.3% year over year to $121.1 million.

Net cash flow resulting from operating activities for the year ending Dec 31, 2017, came in at $249.3 million, down from $287.1 million recorded in the comparable period last year. Results were affected primarily due to the lower net income as adjusted for non-cash items and the timing of payments made under the MTA agreement.

As of Dec 31, 2017, Outfront Media’s liquidity position comprised cash of $48.3 million, as well as $341.4 million of availability under its $430.0 revolving credit facility, net of $88.6 million of issued letters of credit against the revolving credit facility.

Our Take

Outfront Media is making diligent efforts to expand its digital display portfolio. It has resorted to acquisitions, swaps and conversion of traditional static billboard displays to digital billboard displays to focus on this low-cost out-of-home (OOH) platform. These strategic efforts bode well for its long-term growth. Also, the company is strengthening its technology platform to grow its client base and leverage on the fragmented OOH industry. Further, its huge diversity, both industry and geographical wise, makes its revenues less volatile.

However, the dreary environment in the national advertising market remains a risk. Also, seasonality of business and dependence on the prospects of advertisers are the challenges for the company. Interest rate hikes add to its woes.

Performance of Other REITs

Here are a few other REIT companies that have reported their fourth quarter 2017 results in February 2018.

Ventas, Inc. VTR reported fourth-quarter 2017 normalized FFO of $1.03 per share, in line with the Zacks Consensus Estimate. The figure also matched the year-ago quarter tally. Results reflect improved property performance and accretive investments.

Cousins Properties Incorporated CUZ reported fourth-quarter 2017 FFO per share of 15 cents, surpassing the Zacks Consensus Estimate by a penny. Results reflect better-than-expected revenues in the quarter. Further, a rise in second-generation net rent-per-square-foot on a cash basis was experienced.

PS Business Parks, Inc. PSB reported fourth-quarter 2017 core FFO of $1.52 per share, missing the Zacks Consensus Estimate by a penny. However, the figure came in 9.4%, higher than $1.39 recorded in the prior-year quarter. The rise on a year-over-year basis stemmed from higher NOI, reduced general and administrative expenses and savings from lower preferred distributions.

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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