On Mar 16, 2015, we issued an updated research report on Lamar Advertising Co. LAMR. In Nov 2014, this Baton Rouge, LA-based company completed the final phase in the reorganization of its business operations for qualifying as a REIT. We believe the company’s newly-earned REIT status, impressive footprint and diversified tenant base would help it maintain the growth momentum going forward.
To qualify as a REIT, Lamar was merged with and into its wholly owned subsidiary, Lamar Advertising REIT Company. This big strategic move will allow Lamar to capitalize on a seemingly more favorable tax environment, and thus serve as a positive development in the long run.
On Feb 25, 2014, Lamar 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 the fourth quarter. The company had earned 11 cents per share in the comparable period prior year.
Lamar boasts a diversified tenant base which includes retailers, restaurants, hospitals and healthcare companies, and hence, makes revenues less volatile. Further, the company is a leading provider of logo signs in the country and holds around 18% of the U.S. market share in the outdoor advertising business.
However, higher expenses associated with acquisition of outdoor advertising assets, competition from other outdoor advertisers and other forms of media, and an anticipated rise of interest rates in the medium term pose challenges before Lamar.
Over the past 30 days, though the Zacks Consensus Estimate for 2015 has declined 1.6% to $4.43 per share, that for 2016 has inched up 1.5% to $4.67 per share.
Lamar currently carries a Zacks Rank #2 (Buy).
Other well-ranked equity REITs include Ryman Hospitality Properties, Inc. RHP, CareTrust REIT, Inc. CTRE and Kilroy Realty Corp. KRC. All these stocks sport a Zacks Rank #1 (Strong Buy).
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