Lamar Advertising Company’s LAMR efforts to upgrade its traditional static billboards to digital ones will support the company’s growth over the long run. However, such growth initiatives require huge capital outlays that might strain free cash-flow growth and margins.
In third-quarter 2019, Lamar reported adjusted funds from operations (FFO) per share of $1.62, surpassing the Zacks Consensus Estimate of $1.59. Net revenues came in at $457.8 million, which also outpaced the Zacks consensus Estimate of $453.2 million.
Results were supported by increase in both local and national advertising revenues. Further, same-unit digital revenues went up 6.9%.
Notably, digitalization, acquisitions and media market share shift are multiple growth drivers for the company. Lamar is aimed at digital deployment of around 350 units by the end of this year. This upgradation effort is anticipated to boost occupancy in its existing advertising displays while enabling the company to raise advertising rates.
Additionally, fragmentation in the advertising media industry and technological advancements in the outdoor segment are supporting the shift to outdoor advertising. Therefore, Lamar is expanding its footprint to tap growth opportunities, and expects total acquisitions worth $235-$240 million in the ongoing year. Such efforts augur well for the company’s long-term growth.
Robust balance-sheet sheet strength and liquidity position enable the company to pursue these opportunities. In fact, as of Sep 30, 2019, it had $345.4 million of liquidity. The company also has an at-the-market equity offering program in place to support its acquisition plans.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have gained 9.1%, as against the industry’s decline of 2.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, continued acquisition of outdoor advertising assets and portfolio upgradation has been escalating capital expenditures. In fact, the company expects total capital expenditure to flare up 8.8% year over year, for 2019. This might hamper Lamar’s financial performance.
Further, Lamar faces stiff competition from national players. Specifically, the company competes against larger peers with diversified operations, which have an advantage of cross-selling complementary advertising products to advertisers. This is expected to impair the company’s growth momentum.
Stocks to Consider
Cousins Properties Incorporated CUZ currently carries a Zacks Rank of 2 (Buy). The Zacks Consensus Estimate for the ongoing year’s FFO per share climbed 1.4% to $2.94 in a month’s time.
Healthcare Realty Trust Incorporated HR carries a Zacks Rank of 2, at present. The company’s FFO per share estimate for 2019 moved 1.2% north to $1.60 over the past week.
EastGroup Properties, Inc. EGP also carries a Zacks Rank of 2, currently. The company’s FFO per share estimate for this year moved up to $4.94 over the past month.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Lamar Advertising Company (LAMR) : Free Stock Analysis Report
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