Lamar Advertising Company’s LAMR diversified tenant base, impressive national footprint and acquisitions will likely support growth in the foreseeable future.
Specifically, Lamar boasts an impressive national footprint and holds a leading position as a provider of logos in the United States. It enjoys a diversified tenant base, comprising restaurants, services, retailers and healthcare companies. The company sources a significant part of revenues from local business, with a diversified tenant base. As a result, this source of revenues is less volatile.
Moreover, outdoor advertising is a low-cost and wide-reaching medium. This industry has scope to grow at a solid pace as consumers spend most of their time away from home. Also, fragmentation of other advertising media and technological advancements in the outdoor segment are aiding the shift to outdoor advertising.
While Lamar already holds a significant market share in the U.S. outdoor advertising business, it is now expanding the footprint to tap growth opportunities. During 2018, Lamar completed acquisitions for total price consideration of nearly $489.7 million.
However, the outdoor advertising industry is considerably regulated and acquisitions tend to be marginally profitable or require considerable subsequent investments. Resultantly, high investment expenditure for acquisitions is expected to take a toll on the company’s balance sheet.
Nevertheless, Lamar is upgrading the portfolio well and increasing occupancy in existing advertising displays and raising advertising rates. Further, the company operates in an industry that is characterized by high barriers to entry. This provides it with higher bargaining power and solid competitive edge.
Lamar also came up with a better-than-expected performance in the fourth quarter. The company reported adjusted fund from operation (FFO) per share of $1.48, which surpassed the Zacks Consensus Estimate by seven cents and was higher than the year-ago figure of $1.38. Further, net revenues of $427.9 million outpaced the Zacks Consensus Estimate of $420.6 million.
Hence, this Zacks Rank #2 (Buy) company remains well poised to capitalize on the outdoor advertising industry’s encouraging prospects and provide benefits to shareholders accordingly.
Over the past year, shares of Lamar have rallied 26.4% compared with its industry’s growth of 21.3%.
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