An IPO for the old-fashioned billboard

CBS Outdoor Americas has filed to go public, asking investors to pay a premium for displays that can't be turned off or fast-forwarded.

By MSN Money Partner Mar 19, 2014 2:27PM
Credit: © Robert Landau/Alamy

Caption: CBS Outdoor billboard for the movie 42 about Jackie Robinson of the Brooklyn DodgersBy Kyle Stock, Businessweek

Nothing demonstrates localized, targeted marketing quite like a giant sign looming over a roadway. 

As Silicon Valley rushes a bunch of half-baked, unprofitable businesses to Wall Street, CBS (CBS) is hawking a hunk of its billboard unit -- an old-fashioned advertising technology with state-of-the-art profits.

Here's the company's pitch to investors: "Our displays are ALWAYS ON and cannot be turned off, skipped or fast-forwarded." Unlike, say, CBS TV shows. A bit corny, maybe, yet a sound point. 

Last year the billboard division made an 11 percent return on $1.3 billion in revenue. Google (GOOG) and Facebook (FB) did better, but that profit margin beats more than half of the Standard & Poor's 500-stock index, including Comcast (CMCSA), General Electric (GE) and Verizon (VZ).

The model is quite simple. CBS Outdoor rents out about 330,000 billboards and "transit posters" in the U.S. and another 26,000 or so in Canada and Latin America. It owns most of the infrastructure and generally leases the land on which its billboards stand. New York is its biggest market, accounting for 17 percent of sales, followed by Los Angeles.

There is technology in the space -- namely, digital billboards -- but CBS hasn't been too urgent about adopting these outside of New York's Times Square. Fewer than 400 of its displays are digital. Why bother when nearly all of the country's biggest advertisers are already in its book of clients, including AT&T (T), Diageo (DEO), Disney (DIS), McDonald’s (MCD) and Sony (SNE).

The problem with the business is its growth prospects. Slow and steady are the most accurate descriptions, and there's plenty of competition. But the challenges to growth are also valuable protections. Three out of every four CBS billboards are "legal nonconforming," meaning they would not allowed to be built under current laws -- a grandfather clause that preempts open competition.

Think about that for a minute. Imagine if the rules of the Internet precluded another Facebook or put a cap on how many search engines could show up in your toolbar. In markets where billboard space is saturated, all CBS has to do is keep renewing its leases and keep ratcheting up prices.

Of course, CBS knows its billboard business is sweeter than it might appear. In a filing this week the company said it will sell 20 million shares for $26 to $28 apiece, which would value the company at about $3.36 billion. In terms of sales and profits, that’s richer than both Omnicom (OMC) and Publicis Groupe (PGPEF), two of the biggest advertising companies in the business.

More from Businessweek

Mar 19, 2014 5:27PM
Your displays are always on and can't be turned off LOL. All I need to do is click that little switch in my mind you have no control over and its off.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
262 rated 2
480 rated 3
651 rated 4
649 rated 5
629 rated 6
616 rated 7
496 rated 8
346 rated 9
111 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.