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Lamar Upgraded to Outperform

Zacks Equity Research

We recently upgraded our recommendation on Lamar Advertising Company (NasdaqGS:LAMR - News) from Neutral to an Outperform rating.

Lamar is a Louisiana-based leading owner and operator of outdoor advertising structures in the U.S. The company has developed its localized billboard advertising businesses through a combination of organic growth and strategic acquisitions. Moreover, its internal and external investment activities have allowed it to capture a considerable share of localized outdoor advertising markets.

The company reported quite an improvement in its third quarter results with earnings per share of 4 cents, exceeding the year-ago reported earnings of 1 cent. Net revenue jumped 3.2% year over year and exceeded management’s guidance by 1.3%.

Moreover, the company’s debt level plummeted in the quarter, bringing down the interest expense in the quarter by 6.2%. Also, growth of more than 100% in cash and cash equivalents is worth mentioning. We believe that with hopes reviving from the US economy, 2012 will probably be a better year of performance for Lamar. Even the company’s investments to improve its advertising assets will help Lamar capitalize on every possible opportunity.

The current Zacks Consensus Estimate for earnings per share for the fiscal year 2011 and 2012 are 3 cents and 21 cents, representing annual growth of 110.67% and 693.75%, respectively.

The positive factors notwithstanding, a company like Lamar is fraught with difficulties. To many small and mid sized businesses obtaining loans, higher payroll and site lease expenses can be quite challenging, which ultimately affect Lamar’s businesses. Moreover, the company’s facing intensifying competition from its peers like Clear Channel Outdoor Holdings Inc.(NYSE:CCO - News). keeps us on the sidelines.

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