Lamar Advertising Co. (LAMR): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
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.

Overview:

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 Rico.

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.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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