Many so-called "reopening stocks" have rebounded dramatically, and some are even trading for more than they were before the COVID-19 pandemic. However, outdoor advertising real estate company Outfront Media (NYSE: OUT), which owns and operates billboards and transit system advertising, is still trading for a substantial discount to its pre-pandemic share price.
Here's an overview of how badly Outfront's business was affected by the 2020 shutdowns and COVID-19 precautions, how it's doing now, and what investors should watch going forward.
There is more to Outfront Media's business than I can explain in a few sentences. But it can be generally broken into two baskets: billboards and transit system advertising. And both were severely affected when the pandemic started.
On the billboard side, with fewer people driving around the United States and extreme economic uncertainty at the time, companies were reluctant to spend on roadside advertising. In the second quarter of 2020, billboard revenue declined by 38% compared to the year before.
Transit system advertising took an even bigger hit. A primary function of transit systems is to take people to their offices, and virtually nobody was working in offices in the early days of the pandemic. It doesn't make good business sense to advertise your product in an empty subway station, so transit revenue dropped by more than 70%.
In all, Outfront Media's quarterly revenue dropped from $460 million in the second quarter of 2019 to $233 million in the second quarter of 2020. That's a big decline, and it's no wonder that the company's stock took a nosedive. In fact, Outfront Media still trades for about 20% below its pre-pandemic high.
The business is starting to rebound
As the pandemic has evolved and more of the U.S. starts to reopen, Outfront Media's revenue has rebounded strongly. Billboard revenue increased by nearly 50% year over year in the second quarter of 2021, and transit ad revenue increased by more than 55%. In short, as more people start getting out and about, companies seem more willing to spend money on advertising.
The third quarter and beyond could get interesting
As impressive as Outfront Media's recent results are, it's important to point out that the business isn't quite back to pre-pandemic levels yet. Here's a breakdown of Outfront's revenue in the second quarters of the past three years.