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Here's Why You Should Add Lamar (LAMR) to Your Portfolio Now
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Shares of Lamar Advertising Company (LAMR - Free Report) have been performing well, of late. Year to date, the stock has rallied 14.1%, while the industry has gained 6.6%.
The rally is anticipated to continue in the near term, as there are a number of favorable factors.
In third-quarter 2017, the company posted encouraging results with respect to funds from operations (FFO) per share. It delivered a FFO of $1.40 per share that comfortably surpassed the Zacks Consensus Estimate of $1.32. Results were backed by growth in operating income, adjusted EBITDA and cash flow from operating activities.
Key Driving Factors
Stable revenues from a diverse tenant base: Lamar enjoys a diversified tenant base comprising restaurants, services, retailers and health-care companies. A significant part of the company’s revenues comes from local business, with a diversified base of tenants. As a result, this source of revenues is less volatile in nature. Further, the company is the leading provider of logo signs in the nation. This is likely to aid its growth momentum.
Robust Growth Potential in Outdoor Advertising Industry: The outdoor advertising industry has been growing on a secular basis as consumers spend most of their time away from home. Further, fragmentation across other advertising media, technological advancements, as well as the low-cost wide-reach characteristic of the outdoor segment is accelerating the shift to outdoor advertising. Also, the high barrier to entry due to permitting restrictions makes market penetration difficult in the industry. Lamar typically owns permits that allow out-of-home advertising at each location. This provides it a solid competitive edge.
Focus on Business Expansion: Tapping growth opportunities of the outdoor advertising industry, Lamar is aimed at business expansion through acquisitions and investments. In fact, in the third quarter the company closed 13 acquisitions for a total price consideration of $91.8 million. This included assets of Steen Outdoor Advertising in four U.S. markets — Philadelphia, western New Jersey, Delaware and suburbs of Pennsylvania. Such efforts help the company upgrade its portfolio, and boost occupancy and advertising rates for existing advertising displays.
Strong cash flow per share: The company generates cash flow per share of $5.33 as compared to the industry’s average of $2.27. In addition, its current ratio indicates a decent liquidity position. This, along with impressive year-over-year free cash flow growth, makes us optimistic about Lamar’s operating performance for the long term.
Superior return on equity (ROE): Lamar has an ROE of 29%, significantly higher than the industry’s average of 5.78%. This depicts optimal utilization of equity and boosts investors’ confidence in the stock.
Other top-ranked stocks in the real estate investment trust space include Franklin Street Properties (FSP - Free Report) , Columbia Property Trust and MedEquities Realty Trust (MRT - Free Report) . All three carry a Zacks Rank of 2.
Franklin Street Properties’ FFO per share estimates for 2017 remained unchanged at $1.05 over the past month. Its share price has increased 6.7% in three months’ time.
Columbia Property Trust’s FFO per share estimates for the current year have moved up 2.7% to $1.15 in a month’s time. Over the past three months, the company’s shares have gained 9.1%.
MedEquities Realty’s 2017 FFO per share estimates remained unchanged at $1.12 over the past month. The stock has been down 2.2% for the past three months.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. 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.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Here's Why You Should Add Lamar (LAMR) to Your Portfolio Now
Shares of Lamar Advertising Company (LAMR - Free Report) have been performing well, of late. Year to date, the stock has rallied 14.1%, while the industry has gained 6.6%.
The rally is anticipated to continue in the near term, as there are a number of favorable factors.
In third-quarter 2017, the company posted encouraging results with respect to funds from operations (FFO) per share. It delivered a FFO of $1.40 per share that comfortably surpassed the Zacks Consensus Estimate of $1.32. Results were backed by growth in operating income, adjusted EBITDA and cash flow from operating activities.
Key Driving Factors
Stable revenues from a diverse tenant base: Lamar enjoys a diversified tenant base comprising restaurants, services, retailers and health-care companies. A significant part of the company’s revenues comes from local business, with a diversified base of tenants. As a result, this source of revenues is less volatile in nature. Further, the company is the leading provider of logo signs in the nation. This is likely to aid its growth momentum.
Robust Growth Potential in Outdoor Advertising Industry: The outdoor advertising industry has been growing on a secular basis as consumers spend most of their time away from home. Further, fragmentation across other advertising media, technological advancements, as well as the low-cost wide-reach characteristic of the outdoor segment is accelerating the shift to outdoor advertising. Also, the high barrier to entry due to permitting restrictions makes market penetration difficult in the industry. Lamar typically owns permits that allow out-of-home advertising at each location. This provides it a solid competitive edge.
Focus on Business Expansion: Tapping growth opportunities of the outdoor advertising industry, Lamar is aimed at business expansion through acquisitions and investments. In fact, in the third quarter the company closed 13 acquisitions for a total price consideration of $91.8 million. This included assets of Steen Outdoor Advertising in four U.S. markets — Philadelphia, western New Jersey, Delaware and suburbs of Pennsylvania. Such efforts help the company upgrade its portfolio, and boost occupancy and advertising rates for existing advertising displays.
Strong cash flow per share: The company generates cash flow per share of $5.33 as compared to the industry’s average of $2.27. In addition, its current ratio indicates a decent liquidity position. This, along with impressive year-over-year free cash flow growth, makes us optimistic about Lamar’s operating performance for the long term.
Superior return on equity (ROE): Lamar has an ROE of 29%, significantly higher than the industry’s average of 5.78%. This depicts optimal utilization of equity and boosts investors’ confidence in the stock.
Zacks Rank: The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Stocks to Consider
Other top-ranked stocks in the real estate investment trust space include Franklin Street Properties (FSP - Free Report) , Columbia Property Trust and MedEquities Realty Trust (MRT - Free Report) . All three carry a Zacks Rank of 2.
Franklin Street Properties’ FFO per share estimates for 2017 remained unchanged at $1.05 over the past month. Its share price has increased 6.7% in three months’ time.
Columbia Property Trust’s FFO per share estimates for the current year have moved up 2.7% to $1.15 in a month’s time. Over the past three months, the company’s shares have gained 9.1%.
MedEquities Realty’s 2017 FFO per share estimates remained unchanged at $1.12 over the past month. The stock has been down 2.2% for the past three months.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. 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.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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