On Nov 8, we upgraded
Lamar Advertising Co.
) to Outperform based on its solid third quarter 2013 results
announced on Nov 6.
Why the Upgrade?
Lamar Advertising isone of the largest owners and operators of
outdoor advertising structures in the U.S. For third-quarter
2013, the company beat the Zacks Consensus Estimate on both the
earnings and revenues front. Earnings came in at 19 cents
per share, 5.5% above the Zacks Consensus Estimate of 18 cents.
The reported figure was 46% higher than the prior-year quarter.
Net revenue for the reported quarter increased 5.5% year over
year to $323.2 million.
Lamar has expanded its localized billboard advertising
businesses through a combination of organic growth and strategic
acquisitions. The outdoor advertising industry is growing on a
secular basis as consumers spend most of their time away from
home. Fragmentation across other advertising media and
technological advancements in the outdoor segment are aiding the
shift to outdoor advertising. In order to tap these markets, the
company has acquired various outdoor advertising assets to
increase the number of outdoor advertising displays in existing
and new markets. These initiatives are likely to benefit the
company in the long run
Apart from the above reasons, Lamar's expected conversion to a
real estate investment trust
(REIT) status is expected to boost its adjusted funds from
operations (AFFO) for 2014.
REITs are required to pay out at least 90% of taxable income
annually to shareholders as dividends, resulting in reduced tax
burden and a boost in cash flow. This is likely to benefit the
company's bottom line. Moreover, the REIT status will also
augment shareholders' wealth in the form of increased dividend
Other Stocks to Consider
Lamar Advertising has a Zacks Rank #3 (Hold). Other players in
the industry worth considering include
Publicis Groupe SA
Channel Outdoor Holdings Inc
). All of these carry a Zacks Rank #2 (Buy).
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