Outfront Media Shares Have Taken A Beating, But Is It Time To Buy?

David Miller, managing director for Loop Capital Markets, has upgraded Outfront Media Inc (NYSE: OUT) to Buy as he sees over 18 percent of upside.

After missing on nearly every consensus earnings metric, the stock has fallen 13 percent since its first-quarter earnings report. Miller believes the “reward outweighs the risk,” and with Outfront’s current 6.3 percent dividend, he has set a price target of $27.

A Look Back At Outfront’s Q1 Earnings Report

• Adjusted funds from operations miss.
• Shifted guidance on AFFO from "low to mid-single digit growth," to management now believing that the growth numbers will be lower than 2016's report.
• Management said it expected the New York Mass Transit Contract to “kick the can down the road.”

According to Miller’s report, after evaluating all of the possible scenarios in which this could play out, Outfront still has a fair valuation.

Over the past month, shares of the REIT are down over 2.4 percent, with intraday volatility a common occurrence within that range.

There Is Still Hope

Miller does not believe a dividend cut is likely in the near future. He said, “Investors who go long today not only pick up a discounted valuation at 11.1x 2017 AFFO and 10.3x anticipated 2018 AFFO (most Housing/Apartment REITS trade at 16.0x forward AFFO), but also get paid while they wait, as that $1.44/share dividend is only likely to be cut under the most draconian of economic conditions.”

Outfront is still trading in line with Clear Channel Outdoor Holdings, Inc. (NYSE: CCO), based on probability weight.