We are downgrading our recommendation on Lamar to Neutral from
Outperform, due to meek second-quarter results. The company's net
income per share decreased on a year-over-year basis due to loss on
debt extinguishment expense. Also, operating income and adjusted
earnings before interest, taxes, depreciation and amortization
(EBITDA) declined on a year-over-year basis. Nevertheless, Lamar
experienced a fall in interest expenses. We believe the company's
REIT conversion move to capitalize on a seemingly more favorable
tax environment is a strategic fit for long-term growth.
Additionally, the recent buyout of a New Orleans-based advertising
company bodes well as it will include REIT-qualified, premium
billboard assets in its portfolio.
Headquartered in Baton Rouge, LA, Lamar Advertising Company is
one of the largest owners and operators of outdoor advertising
structures in the U.S. It provides advertising services to
restaurants, retailers, automotive, real estate, health care,
gaming, service, hotel and motel, telecommunication, and amusement
industries, including entertainment and sports.
Lamar has a single operating and reportable segment, namely
advertising. The company offers three types of outdoor advertising
displays: 1) billboards, 2) logo signs, and 3) transit advertising
displays. Lamar sells advertising space on two types of billboards:
bulletins and posters. Bulletins are generally large, illuminated
advertising structures, and are typically located on major highways
and target vehicular traffic spots. On the other hand, posters are
relatively smaller than bulletins and are located on major traffic
arteries, city streets, and targeted vehicular and pedestrian
traffic spots. In addition to traditional billboards, Lamar also
offers digital billboards, which are usually located on major
traffic arteries and city streets. Logo signs are normally located
near highway exits, nearby gas, food, camping, lodging and other
attractions. Transit advertising displays are advertising spaces
sold on the exterior and interior of public transportation
vehicles, transit shelters and benches.
As of Aug 7, 2014, the company operates more than 150 outdoor
advertising companies in 44 states of the U.S., Canada and Puerto
Rico. In addition, the company has logo businesses in 23 states and
the province of Ontario, Canada and more than 60
transit-advertising franchises in the U.S., Canada and Puerto
Lamar is undergoing a formal transformation to a REIT (real
estate investment trust). On Apr 23, 2014, Lamar received a
requested private letter ruling from the U.S. Internal Revenue
Service (the "IRS") related to its intended election to be taxed as
a real estate investment trust (REIT) under the Internal Revenue
Code of 1986.
Lamar Advertising Co. (LAMR): Read the Full
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LAMAR ADVER CO (LAMR): Free Stock Analysis
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