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Lamar's (LAMR) Stock Gains 10.2% in 6 Months: Here's Why
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Shares of Lamar Advertising (LAMR - Free Report) have gained 10.2% in the past six months against its industry’s fall of 3.4%. The company currently carries a Zacks Ranks #3 (Hold).
Last month, this real estate investment trust (REIT), headquartered in Baton Rouge, LA, reported a fourth-quarter adjusted funds from operations (AFFO) per share of $1.91, surpassing the Zacks Consensus Estimate of $1.69. The figure rose 7.3% year over year.
Quarterly net revenues were $535.5 million, improving 8.3% on a year-over-year basis. Per management, the company experienced strong local sales, which helped offset the declining demand from national customers.
Management expects AFFO per share of $7.40-$7.55 for 2023. The Zacks Consensus Estimate for the same is pegged at $7.47, which is within the company’s guided range.
Image Source: Zacks Investment Research
Let us decipher the factors behind the surge in the stock price.
Lamar is one of the largest owners and operators of outdoor advertising structures in the United States. It offers its customers the largest network of digital billboards in the United States, with more than 4,500 displays as of the fourth-quarter 2022 end.
The company has an impressive footprint of outdoor advertising assets across the United States and Canada. Also, its diversified tenant base across various sectors and focus on local businesses have paid off.
The continued sales momentum across Lamar’s billboard, logo, transit and airport businesses aided its fourth-quarter 2022 performance. Particularly, categories, such as service, education, amusements, and notably auto and retail, portrayed relative strength in the quarter.
Acquisition-adjusted net revenues for the fourth quarter climbed 4.6% year over year. Also, acquisition-adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) climbed 6.3%. In addition, local and regional sales accounted for nearly 78% of billboard revenues in the fourth quarter.
The rates on its large-format traditional bulletins increased in each quarter of 2022. It grew more than 8% for the year. Moreover, the occupancy of its outdoor portfolio at the end of 2022 remained at a historic high.
Given the technological advancements and low-cost nature of out-of-home (OOH) advertising, it has been gaining traction in recent years. Therefore, Lamar’s strategic acquisitions of outdoor advertising assets in its existing and new markets have been fruitful.
In 2022, the company completed several acquisitions of outdoor advertising assets for $479.8 million. The total purchase price was inclusive of the acquisitions of Burkhart Advertising Inc. for $130 million, and Fairway Outdoor and Standard Outdoor for $92.6 million.
On the balance sheet front, Lamar had $746.6 million in liquidity as of Dec 31, 2022. Its well-laddered debt maturity profile and low leverage compared with its industry have enabled it to capitalize on long-term growth opportunities.
The company’s trailing 12-month return on equity (ROE) is 35.56% compared with the industry’s average of 3.60%. This reflects that the company has been more efficient in using shareholders’ funds than its peers.
Also, LAMR’s projected current cash flow growth is 19.39% compared with 11.88% growth estimated for the industry.
Solid dividend payouts remain the biggest attraction for REIT investors, and LAMR has remained committed to the same. The company has been consistent in paying its dividends. In February 2023, the company’s board of directors announced a quarterly cash dividend of $1.25 per share on its Class A common stock and Class B common stock, representing a 4.2% hike sequentially. The dividend will be paid out on Mar 31 to its shareholders of record as of Mar 17, 2023. Such efforts raise investors’ optimism in the stock.
Nonetheless, stiff competition from other outdoor advertisers and other forms of media is a key concern for Lamar. Increasing interest rates can act as other deterrents for the company.
The Zacks Consensus Estimate for Alexandria Real Estate’s 2023 FFO per share is pegged at $8.95.
The Zacks Consensus Estimate for Terreno Realty’s current-year FFO per share is pinned at $2.17.
The Zacks Consensus Estimate for Service Properties Trust’s 2023 FFO per share is pegged at $1.89.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Lamar's (LAMR) Stock Gains 10.2% in 6 Months: Here's Why
Shares of Lamar Advertising (LAMR - Free Report) have gained 10.2% in the past six months against its industry’s fall of 3.4%. The company currently carries a Zacks Ranks #3 (Hold).
Last month, this real estate investment trust (REIT), headquartered in Baton Rouge, LA, reported a fourth-quarter adjusted funds from operations (AFFO) per share of $1.91, surpassing the Zacks Consensus Estimate of $1.69. The figure rose 7.3% year over year.
Quarterly net revenues were $535.5 million, improving 8.3% on a year-over-year basis. Per management, the company experienced strong local sales, which helped offset the declining demand from national customers.
Management expects AFFO per share of $7.40-$7.55 for 2023. The Zacks Consensus Estimate for the same is pegged at $7.47, which is within the company’s guided range.
Image Source: Zacks Investment Research
Let us decipher the factors behind the surge in the stock price.
Lamar is one of the largest owners and operators of outdoor advertising structures in the United States. It offers its customers the largest network of digital billboards in the United States, with more than 4,500 displays as of the fourth-quarter 2022 end.
The company has an impressive footprint of outdoor advertising assets across the United States and Canada. Also, its diversified tenant base across various sectors and focus on local businesses have paid off.
The continued sales momentum across Lamar’s billboard, logo, transit and airport businesses aided its fourth-quarter 2022 performance. Particularly, categories, such as service, education, amusements, and notably auto and retail, portrayed relative strength in the quarter.
Acquisition-adjusted net revenues for the fourth quarter climbed 4.6% year over year. Also, acquisition-adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) climbed 6.3%. In addition, local and regional sales accounted for nearly 78% of billboard revenues in the fourth quarter.
The rates on its large-format traditional bulletins increased in each quarter of 2022. It grew more than 8% for the year. Moreover, the occupancy of its outdoor portfolio at the end of 2022 remained at a historic high.
Given the technological advancements and low-cost nature of out-of-home (OOH) advertising, it has been gaining traction in recent years. Therefore, Lamar’s strategic acquisitions of outdoor advertising assets in its existing and new markets have been fruitful.
In 2022, the company completed several acquisitions of outdoor advertising assets for $479.8 million. The total purchase price was inclusive of the acquisitions of Burkhart Advertising Inc. for $130 million, and Fairway Outdoor and Standard Outdoor for $92.6 million.
On the balance sheet front, Lamar had $746.6 million in liquidity as of Dec 31, 2022. Its well-laddered debt maturity profile and low leverage compared with its industry have enabled it to capitalize on long-term growth opportunities.
The company’s trailing 12-month return on equity (ROE) is 35.56% compared with the industry’s average of 3.60%. This reflects that the company has been more efficient in using shareholders’ funds than its peers.
Also, LAMR’s projected current cash flow growth is 19.39% compared with 11.88% growth estimated for the industry.
Solid dividend payouts remain the biggest attraction for REIT investors, and LAMR has remained committed to the same. The company has been consistent in paying its dividends. In February 2023, the company’s board of directors announced a quarterly cash dividend of $1.25 per share on its Class A common stock and Class B common stock, representing a 4.2% hike sequentially. The dividend will be paid out on Mar 31 to its shareholders of record as of Mar 17, 2023. Such efforts raise investors’ optimism in the stock.
Nonetheless, stiff competition from other outdoor advertisers and other forms of media is a key concern for Lamar. Increasing interest rates can act as other deterrents for the company.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Alexandria Real Estate Equities (ARE - Free Report) , Terreno Realty (TRNO - Free Report) , each currently carrying a Zacks Rank #2 (Buy), and Service Properties Trust (SVC - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Alexandria Real Estate’s 2023 FFO per share is pegged at $8.95.
The Zacks Consensus Estimate for Terreno Realty’s current-year FFO per share is pinned at $2.17.
The Zacks Consensus Estimate for Service Properties Trust’s 2023 FFO per share is pegged at $1.89.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.