Shares of Lamar Advertising LAMR have risen 9.5% year to date, outperforming the industry’s growth of 2.3%.
Last week, Lamar reported second-quarter 2024 adjusted funds from operations (AFFO) per share of $2.08, which beat the Zacks Consensus Estimate of $2.07. The figure also compared favorably with the prior-year quarter's tally of $1.90. Results reflected year-over-year growth in the top line, driven by the continued strong demand from local and regional advertisers.
Per the company’s chief executive, Sean Reilly, "The revenue gain, combined with continued discipline on expenses, allowed us to produce adjusted EBITDA growth of nearly 7% and diluted AFFO per share growth of 9.5%. Also, we continue to pace at the top end of our previously provided guidance of $7.75 to $7.90 for full year diluted AFFO per share.”
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The impressive footprint of outdoor advertising assets, the unmatched logo sign business, a diversified tenant base across various sectors and a focus on local businesses are tailwinds for Lamar.
Moreover, the estimate revision trend for 2024 funds from operations (FFO) per share indicates a favorable outlook for this Zacks Rank #2 (Buy) company as it has been revised five cents northward over the past month.
Let’s Delve Deeper
Impressive Footprint & Diversified Tenant Base: The company enjoys an impressive national footprint and holds a leading position as a provider of logo signs in the United States. It enjoys a diversified tenant base, comprising tenants from the services, health care, restaurants, retailers, automotive, insurance and gaming categories.
Lamar also sources a significant part of its revenues from local businesses, with a diversified base of tenants. This generally leads to less volatility in revenues.
In the second quarter of 2024, local and regional sales accounted for 79% of the company’s billboard revenues. Moreover, local and regional sales reported growth for the 13th consecutive quarter.
Bolstering Digital Capabilities: Over the recent years, the company has made concerted efforts to upgrade its portfolio, increasing occupancy in its existing advertising displays and enabling it to enjoy a significant market share in the U.S. outdoor advertising business. The company's increased focus on bolstering its digital capabilities augurs well for long-term growth.
Lamar offers customers the largest network of digital billboards in the United States, with more than 4,800 displays as of the end of the second quarter of 2024. The company has added a large number of digital screens through acquisitions and internal conversions over the past several years. Lamar’s digital revenues account for around 30% of its billboard billings.
Expansionary Efforts: Out-of-home (OOH) advertising has been growing at a rapid pace and continues to increase the company’s market share in comparison with other forms of media. The cost of advertisement through this medium is lower than other media. Also, fragmentation across other advertising media and technological advancements in the OOH segment are aiding the shift to outdoor advertising.
In this environment, Lamar’s expansion activities over the recent years bode well for long-term growth. During the first half of 2024, the company completed multiple acquisitions for a total cash purchase price of around $28.2 million. It completed 36 acquisitions for a total purchase price of $139 million in 2023 and 73 acquisitions of outdoor advertising assets for $479.8 million in 2024. With such expansion efforts, it is poised to ride the growth curve.
Cash Flow Strength & ROE: Lamar has enjoyed historical cash flow growth of 8.25% compared with 2.57% of the industry. As of Jun 30, 2024, Lamar Advertising had a total liquidity of $744.3 million. Moreover, this REIT’s trailing 12-month return on equity (ROE) highlights its growth potential. Lamar’s ROE is 42.18% compared with the industry’s average of 3.26%. This reflects that the company reinvests more efficiently compared with the industry.
Dividend Payout: Solid dividend payouts remain the biggest attraction for REIT investors, and Lamar has been committed to the same. In February 2024, the firm increased its quarterly dividend payment on its Class A common stock and Class B common stock to $1.30 per share from $1.25 paid out earlier, denoting a 4% hike.
In the last five years, the company has raised its dividend seven times. Its five-year annualized dividend growth rate is 16.50%, which is encouraging. Such efforts raise investors’ optimism about the stock.
Other Stocks to Consider
Some other top-ranked stocks from the REIT sector are Terreno Realty Corporation TRNO and Cousins Properties Incorporated CUZ, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Terreno Realty’s 2024 FFO per share has moved marginally northward in the past week to $2.29.
The Zacks Consensus Estimate for Cousins Properties’ ongoing year’s FFO per share has increased marginally over the past month to $2.66.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
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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 Nasdaq, Inc.
