Lamar Advertising Company LAMR is making concerted efforts to incubate its business and increase market share in the U.S. outdoor advertising business. Amid increasing popularity of this advertisement medium, on account of technological advancements in the outdoor segment and its wider reach, the company’s focus to expand market share is a strategic fit.
Most recently, Lamar announced the acquisition of the billboard operations of Fairway Outdoor Advertisingfrom GTCR, LLC, for $418.5 million. Through this buyout, the company adds more than 8,500 high-quality billboards, including more than 135 digital displays.
Further, the all-cash acquisition strengthens its position in five U.S. markets — Greenville/Spartanburg, SC, Raleigh-Durham, NC, Greensboro/Winston-Salem, NC, Athens, GA, and La Crosse, WI.
Per management, the acquisition will be accretive for the company’s 2019 revenues, contributing nearly $70 million in revenues for 2019. Additionally, projected organic sales growth of more than 5% in fourth-quarter 2018, will further boost the company’s growth.
Notably, Lamar anticipates to realize around $4 million in synergies in 2019 through this transaction.
Furthermore, Moody’s Investors Service — the rating division of Moody’s Corporation MCO — reiterated the company’s ratings following the acquisition. The rating agency believes the pro forma leverage will increase to 4x from 3.7x as of third-quarter 2018 (excluding Moody's standard lease adjustments). However, this could decrease below 4xfrom continued EBITDA growth absent future buyouts.
Per Moody’s, the Fairway billboardtransaction will be funded with $215 million from Lamar’s $450-million revolving credit facility, cash from the balance sheet,and $175 million from a new AR securitization facility which is not being rated by Moody's.
These efforts of the company will likely drive long-term profitability. Furthermore, the company remains committed to share its growth with shareholders and recently announced a 5.2% hike in dividend distributions. Particularly, Lamar anticipates disbursing $3.84 per share in quarterly distributions to stockholders in 2019, an increase from $3.65 paid in 2018.
Hence, this Zacks Rank #2 (Buy) company remains well poised to capitalize on the outdoor advertising industry’s encouraging prospects and benefit shareholders accordingly.
Over the past six months, shares of Lamar have declined 3.9%, narrower than its industry’s fall of 9.6%.
Other Key Picks
Other top-ranked stocks from the real-estate space include PS Business Parks, Inc. PSB and Outfront Media Inc. OUT. Each of these stocks carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PS Business Parks’ Zacks Consensus Estimate for 2018 FFO per share moved 1.3% north to $6.45 in the past two months.
Outfront Media’s FFO per share estimates for the current year has been revised 2% upward to $2.09 in two months’ time.
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