Will Lamar (LAMR) Miss Earnings Estimates? - Analyst Blog


Outdoor advertising services provider Lamar Advertising Co. ( LAMR ) is slated to report fourth-quarter and full-year 2013 results before the opening bell on Feb 27. In the last reported quarter, Lamar's earnings beat the Zacks Consensus Estimate by a penny, recording a 5.56% positive surprise. Let's see how things are shaping up for this announcement.

Factors to Consider

Lamar has been seeking expansion via organic growth as well as strategic acquisitions. However, the company has to grapple with several impediments to maintain its growth momentum. These include challenging macroeconomic conditions and stiff competition from larger and more diversified companies that have a wider portfolio of cross-selling complementary advertising products.

Despite the adversities, Lamar has succeeded in achieving border-line increases in growth rates in most of its segments by focusing on its strong, localized outdoor-advertising markets and a budding presence in the transit-related advertising market.

Without any decisive breakthrough deals in the pipeline, the company's fragile growth rates are likely to slide further, hurting the bottom-line. Additionally, Lamar's long-term debt, currently standing at $1.97 billion, also puts significant interest burden on the company.

On the positive side, Lamar is actively pursuing plans to reorganize itself into a real estate investment trust (REIT) in order to capitalize on a relatively more conducive tax environment. The company is optimistic with regard to receiving a favorable ruling from the U.S. Internal Revenue Service (IRS) for the same. An REIT status is likely to reduce Lamar's tax burden and enhance its cash flow as well as augment shareholders' wealth through higher dividends.

Earnings Whispers?    

Our proven model illustrates that Lamar is likely to miss earnings this quarter as it does not have the right combination of two key ingredients. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP:  That is because the Most Accurate estimate stands at 12 cents while the Zacks Consensus Estimate is higher at 15 cents. That is a difference of -20%.

Zacks Rank: Lamar's Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3, when combined with a negative ESP, makes surprise prediction difficult.

Other Stocks to Consider

Here are other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

First Solar, Inc. ( FSLR ), with an earnings ESP of +8.00% and a Zacks Rank #1 (Strong Buy).

Winthrop Realty Trust ( FUR ), with an earnings ESP of +12.50% and a Zacks Rank #1 (Strong Buy).

Safe Bulkers, Inc. ( SB ), with an earnings ESP of +5.26% and a Zacks Rank #1 (Strong Buy).

FIRST SOLAR INC (FSLR): Free Stock Analysis Report

WINTHROP REALTY (FUR): Free Stock Analysis Report

LAMAR ADVER CO (LAMR): Free Stock Analysis Report

SAFE BULKERS (SB): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: IRS , FSLR , FUR , LAMR , SB



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