(Thursday) - Wolfe Research has downgraded Outfront Media (NYSE:OUT) from Outperform to Peer Perform. The firm adjusted its stance on the stock, noting that while there are still positive signs for the out-of-home (OOH) advertising industry, the previous growth expectations for the company have already been factored into its recent performance.
The analyst from Wolfe Research pointed out that Outfront Media's anticipated return to growth in transit advertising, the halt of additional impairments related to the Metropolitan Transportation Authority (MTA) deployment, and the execution of high single-digit growth in adjusted funds from operations (AFFO) for 2024 are now considered in the stock's current valuation.
The firm expressed a more cautious outlook on the national recovery as a driving force for Outfront Media's growth. Earlier in 2024, the national recovery was seen as a significant tailwind for the company. However, the firm now believes that this factor will not be as impactful as initially expected.
Wolfe Research's revised position reflects a shift in expectation for Outfront Media's stock, suggesting that the company's growth prospects are now broadly recognized by the market. The analyst's comments indicate a belief that the stock's potential has been adequately priced in following its recent performance trends.
The downgrade comes after a period of evaluation of the company's strategic moves and market conditions. Wolfe Research has not provided a new price target in this update. The change in the rating implies that Wolfe Research maintains a neutral stance on Outfront Media's stock, aligning it with its peers rather than maintaining a more bullish outlook.
In other recent news, Outfront Media has exhibited steady growth in its second quarter of 2024, particularly in its U.S. Media segment. The company reported a 4% revenue increase in this area, driven by a robust billboard and transit sector, with adjusted OIBDA for U.S. Media seeing a near 10% increase. Digital revenues also saw a notable rise, now making up over a third of total revenues.
TD Cowen has adjusted its price target for Outfront Media from $16.00 to $17.00, maintaining a Hold rating on the stock. This adjustment comes after the company's recent quarterly financial results, where Outfront Media exceeded profitability expectations for the second quarter, despite falling short on revenue. The company's management has expressed optimism for the second half of 2024, particularly in the areas of digital and transit growth.
These recent developments also include the company's plan to distribute a dividend of $0.30 per share in September, with a larger dividend expected later in the year for REIT compliance. Additionally, Outfront Media's Board of Directors may opt to distribute a portion of the dividend from the sale of its Canadian business in stock, which could accelerate debt repayment. The company anticipates mid-single-digit revenue growth in the next quarter, focusing primarily on the domestic market.
InvestingPro Insights
To complement Wolfe Research's analysis, recent data from InvestingPro offers additional context on Outfront Media's (NYSE:OUT) financial position and market performance. The company's market capitalization stands at $3.06 billion, reflecting its significant presence in the out-of-home advertising industry.
Outfront Media has demonstrated strong market performance, with a remarkable 107.74% price total return over the past year. This aligns with the analyst's observation that much of the company's growth potential may already be priced into the stock. Additionally, the stock is trading near its 52-week high, at 95.4% of that peak, further supporting the notion that positive expectations are largely factored into the current valuation.
InvestingPro Tips highlight that Outfront Media offers a high shareholder yield and is trading at a low earnings multiple, with a P/E ratio of 14.2. These factors may contribute to the stock's attractiveness to value-oriented investors, despite the recent downgrade.
For readers interested in a more comprehensive analysis, InvestingPro offers 13 additional tips for Outfront Media, providing a deeper dive into the company's financial health and market position.
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