Outdoor advertising services provider
Lamar Advertising Co.
) 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
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.
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
(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
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%.
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
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To read this article on Zacks.com click here.
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.
), with an earnings ESP of +8.00% and a Zacks Rank #1 (Strong
Winthrop Realty Trust
), with an earnings ESP of +12.50% and a Zacks Rank #1 (Strong
Safe Bulkers, Inc.
), with an earnings ESP of +5.26% and a Zacks Rank #1 (Strong