Clear Channel Outdoor (CCO)

Outdoor advertising company Clear Channel Outdoor (NYSE:CCO) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 8.1% year on year to $405.6 million. Guidance for next quarter’s revenue was better than expected at $448.5 million at the midpoint, 1.2% above analysts’ estimates. Its GAAP loss of $0.12 per share was significantly below analysts’ consensus estimates.

Company Overview

With thousands of digital and traditional displays lighting up America's highways, city streets, and airports, Clear Channel Outdoor (NYSE:CCO) operates billboards, street furniture, and airport displays, connecting advertisers with millions of consumers across the US.

The sector is on the precipice of both disruption and growth as AI, programmatic advertising, and data-driven marketing reshape how things are done. For example, the advent of the Internet broadly and programmatic advertising specifically means that brand building is not a relationship business anymore but instead one based on data and technology, which could hurt traditional ad agencies. On the other hand, the companies in the sector that beef up their tech chops by automating the buying of ad inventory or facilitating omnichannel marketing, for example, stand to benefit. With or without advances in digitization and AI, the sector is still highly levered to the macro, and economic uncertainty may lead to fluctuating ad spend, particularly in cyclical industries.

Clear Channel Outdoor competes with other out-of-home advertising companies such as Outfront Media (NYSE:OUT), Lamar Advertising Company (NASDAQ:LAMR), and JCDecaux (OTCMKTS:JCDXF), along with digital and traditional media companies vying for advertising dollars.

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $1.57 billion in revenue over the past 12 months, Clear Channel Outdoor is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.

As you can see below, Clear Channel Outdoor’s revenue declined by 5.3% per year over the last five years, a tough starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Clear Channel Outdoor’s revenue over the last two years was flat, sugggesting its demand was weak but stabilized after its initial drop.

This quarter, Clear Channel Outdoor reported year-on-year revenue growth of 8.1%, and its $405.6 million of revenue exceeded Wall Street’s estimates by 0.9%. Company management is currently guiding for a 5.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 4.5% over the next 12 months. While this projection implies its newer products and services will spur better top-line performance, it is still below average for the sector.

Clear Channel Outdoor has done a decent job managing its cost base over the last five years. The company has produced an average adjusted operating margin of 10.6%, higher than the broader business services sector.

Analyzing the trend in its profitability, Clear Channel Outdoor’s adjusted operating margin rose by 26.5 percentage points over the last five years, showing its efficiency has meaningfully improved.

This quarter, Clear Channel Outdoor generated an adjusted operating margin profit margin of 19.9%, up 2.1 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although Clear Channel Outdoor’s full-year earnings are still negative, it reduced its losses and improved its EPS by 60.1% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Clear Channel Outdoor, its two-year annual EPS growth of 85.1% was higher than its five-year trend. We love it when earnings improve, but a caveat is that its EPS is still in the red.

In Q3, Clear Channel Outdoor reported EPS of negative $0.12, down from negative $0.07 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Clear Channel Outdoor to perform poorly. Analysts forecast its full-year EPS of negative $0.01 will tumble to negative $0.13.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

While Clear Channel Outdoor posted positive free cash flow this quarter, the broader story hasn’t been so clean. Clear Channel Outdoor’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 6.4%, meaning it lit $6.42 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Clear Channel Outdoor’s margin expanded by 12.5 percentage points during that time. Despite its improvement and recent free cash flow generation, we’d like to see more quarters of positive cash flow before recommending the stock.

Clear Channel Outdoor’s free cash flow clocked in at $41.41 million in Q3, equivalent to a 10.2% margin. This result was good as its margin was 4.6 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Clear Channel Outdoor’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 11.3%, slightly better than typical business services business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Clear Channel Outdoor’s ROIC has increased. This is a great sign when paired with its already strong returns, but we also recognize its lack of profitable growth during the COVID era was the primary reason for the change.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Clear Channel Outdoor’s $6.46 billion of debt exceeds the $155 million of cash on its balance sheet. Furthermore, its 13× net-debt-to-EBITDA ratio (based on its EBITDA of $485.1 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Clear Channel Outdoor could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Clear Channel Outdoor can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

It was good to see Clear Channel Outdoor provide revenue guidance for next quarter that slightly beat analysts’ expectations. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its EPS missed. Overall, this was a softer quarter. The stock remained flat at $2.14 immediately following the results.

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Clear Channel Outdoor.

Clear Channel Outdoor isn’t a terrible business, but it isn’t one of our picks. For starters, its revenue has declined over the last five years. And while its rising cash profitability gives it more optionality, the downside is its projected EPS for the next year is lacking. On top of that, its cash burn raises the question of whether it can sustainably maintain growth.

Clear Channel Outdoor’s EV-to-EBITDA ratio based on the next 12 months is 14.2x. This valuation tells us a lot of optimism is priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $2.25 on the company (compared to the current share price of $2.14).