Lamar Advertising Co. (LAMR), which has completed its transition into a REIT (real estate investment trust), reported fourth-quarter 2014 adjusted earnings per share (“EPS”) of 92 cents per share. Including the one-time income tax gains of $120.1, pertaining to its transition into a REIT, EPS came in at $2.18 for fourth-quarter 2014. For the quarter, the company earned 11 cents per share. The Zacks Consensus Estimate for fourth-quarter 2014 earnings was pegged at 38 cents per share.
For the year 2014, EPS was $2.66 compared with 42 cents in 2013. Adjusted FFO for 2014 came in at $4.08 per share, up from $3.65 in 2013. The Zacks Consensus Estimate for 2014 was 90 cents per share.
Quarter in Detail
Adjusted FFO for the quarter came in at $1.23 per share, up from $1.04 in the prior-year quarter. Net revenue for the reported quarter increased 5.1% year over year to $336.7 million, exceeding the Zacks Consensus Estimate of $324 million.
Operating income jumped 38.6% year over year to $88.5 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) climbed 3.8% year over year to $150.6 million.
Lamar had liquidity of $354.2 million at quarter end, of which $328.2 million was available under its revolving senior credit facility and $26.0 million in cash and cash equivalents.
Free cash flow in the reported quarter increased 17.9% year over year to $100.2 million. Lamar defines free cash flow as adjusted EBITDA less interest, net of interest income and amortization of financing costs, current taxes, preferred stock dividends and total capital expenditure.
REIT Conversion
For conversion into REIT, on Nov 18, 2014, Lamar merged with and into its wholly owned subsidiary, Lamar Advertising REIT Company for the taxable year starting Jan 1, 2014.
Guidance
As a REIT, Lamar intends to provide AFFO, a widely accepted operating performance metric for REITs. For 2015, Lamar expects AFFO per share in the range of $4.34 to $4.45.
Our Take
Lamar, on the back of improving operational performance, is gradually trending toward the growth track. Moreover, the company is keen on further expanding its localized billboard advertising business through a combination of organic growth and strategic acquisitions, which bodes well for long-term growth.
Lamar currently has a Zacks Rank #2 (Buy). Investors can also consider stocks like Clear Channel Outdoor Holdings Inc. (CCO), Harte-Hanks Inc. (HHS) and TubeMogul, Inc. (TUBE). All these stocks hold the same Zacks rank as Lamar.
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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