Outbrain Inc. OB will report fourth-quarter 2024 results on Feb. 27, before market open.

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The Zacks Consensus Estimate for revenues in the to-be-reported quarter is pegged at $68.3 million, suggesting 7.1% growth from the year-ago quarter’s actual. The consensus mark for this quarter is pegged at breakeven, whereas it generated earnings of 9 cents per share a year ago. One estimate for the fourth quarter of 2024 moved south in the past 60 days versus no northward revision.

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The company has an impressive earnings surprise history. It beat the Zacks Consensus Estimate in the trailing four quarters, delivering an average earnings surprise of 144.6%.

Outbrain Inc. Price, Consensus and EPS Surprise

Outbrain’s Chances of Q4 Earnings Beat Low

Our proven model does not conclusively predict an earnings beat for OB this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

Outbrain has an Earnings ESP of 0.00% and sports a Zacks Rank of 1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Media Owner Partnerships to Have Been OB’s Drivers in Q4

In the third quarter of 2024, the company renewed agreements with vital publishing partners, including Huffington Post and Meteo in France. OB secured business partnerships with competitors and launched partners, including Sports One Germany, Reuters and Newsweek in Japan.

These relationships ensure a steady base of premium exclusive inventory while providing the company with contextual and engagement data that boost its performance. Therefore, we expect the continued focus on strengthening premium media owner partnerships to have benefited Outbrain’s top line.

Outbrain’s Stock Looks Cheap

OB shares have jumped 46.3% in a year. It has underperformed the 58.3% rally of its industry but outperformed the 19.1% rise of the Zacks S&P 500 composite. It has also outperformed its industry peers, Cardlytics, Inc. CDLX and ECARX Holdings Inc. ECX. CDLX has lost 62% and ECX has fallen 28% over the same period.

One-Year Price Performance

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The OB stock is looking cheap and is currently trading at a trailing 12-month price-to-earnings ratio of 15.7X, well below the industry’s 42.1X.

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Outbrain’s Investment Considerations

In the third quarter of 2024, the company ended with $131 million in cash on its balance sheet with no outstanding debt. A strong cash position with no debt enables Outbrain to invest in technologies and expand into new markets under a minimized risk of financial distress during troubled times. The company enjoys a competitive edge in the digital advertising space on the back of expanding inventory diversity and strengthening premium media partnerships.

Outbrain is expanding beyond its traditional operations, creating opportunities for advertisers to drive results. Revenues generated from supply beyond traditional feeds represented nearly 28% of the top line in the third quarter of 2024, gaining from 26% in the third quarter of 2023. The company has successfully grown this metric across the past six quarters. This expanded supply is a key driver to power advertiser outcomes at scale across the open internet.

OB’s ability to drive sustainable growth is demonstrated by its historical record of delivering a positive free cash flow for five consecutive quarters and outpacing the adjusted EBITDA outlook.  

Final Thoughts: Buy Outbrain Now

OB is set to gain from premium media owner partnerships, diversified offerings for advertisers and a strong balance sheet position. Outbrain’s strong financial performance is revealed by its five-quarter streak of surpassing adjusted EBITDA prospects and generating positive free cash flow. A discounted valuation is a green flag for investors.

Considering these converging strengths, the company is poised for prolonged success, making it a compelling investment this earnings season.

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This article originally published on Zacks Investment Research (zacks.com).

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