JPMorgan Downgrades Outfront Media (OUT) to Neutral on 'Transit Weakness and Reduced Billboard Outlook'

JPMorgan analyst Alexia S. Quadrani downgraded Outfront Media (NYSE: OUT) from Overweight to Neutral with a price target of $14.00 (from $20.00).

The analyst comments "We are downgrading Outfront Media to Neutral from Overweight and establishing our YE24 price target of $14. The company is seeing solid Billboard performance, but growth has not accelerated at the pace we had expected and now see the potential for a weaker second half of 2023. The Transit business and especially the MTA has been a drag on the US Media segment. While 2Q23 results were in-line with modest expectations the guidance for the rest of the year was materially worse as ridership, advertising perception and costs continue to rise. The company now expects US Billboard OIBDA of ~$500m for 2023 and US Transit OIBDA loss of $15-20m. Other OIBIDA and corporate costs are unchanged, which implies a guidance range of $450-460m for consolidated OIBDA. We are lowering our US Media estimate to $447.1m, up 0.9% for 3Q23 and $1.728b for 2023, up 3.2%. We model consolidated OIBDA of $450.5m, down 4.6% y/y, on a 24.7% margin. While we see value in the US Billboard business, the drag is from the MTA and other Transit businesses. Management expects to enter discussions with the MTA and other transit authorities to renegotiate contracts that had assumptions, which are materially lower now and unprofitable for the company. While the potential for a positive outcome could drive upside, the uncertainty around timing and benefit to OUT are too difficult to rely on at this point and we see Transit having little to negative value for now. The company is currently at 5.3x leverage and we do not see it materially worsening despite our lower OIBDA estimates."

For an analyst ratings summary and ratings history on Outfront Media click here. For more ratings news on Outfront Media click here.

Shares of Outfront Media closed at $14.51 yesterday.

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