LAMR Posts Profit, Lags Estimate

Lamar Advertising Company (LAMR - Analyst Report) reported its financial results for the third quarter of the fiscal year 2011 on November 3. Earnings per share in the quarter were 4 cents, an improvement over earnings of 1 cent reported in the third quarter of 2010. However, the results lagged behind the Zacks Consensus Estimate of 7 cents.

Revenue

In the third quarter, pro forma net revenue increased 3.2% year over year to $296.7 million and registered reported growth of 3.7%. The results were above management’s revenue guidance of $293 million and pro forma growth forecast of 2.0%.

Margins

Direct advertising and G&A expenses were $152.7 million, up 2.5% year over year on a pro forma basis. Operating income in the quarter was $55.4 million, up from $46.6 million in the comparable quarter of 2010.

Interest expense declined 6.2% year over year to $42.5 million in the quarter due to a lower debt level. Adjusted EBITDA in the third quarter was $132.6 million versus $128.4 million in the year-ago quarter of 2010.

Balance Sheet

Exiting the third quarter, Lamar Advertising had cash and cash equivalents of approximately $41.5 million, up from $18.7 million in the previous quarter. Total debt, including current maturities decreased to $2,223.2 million from $2,285.7 million in the third quarter of 2010.

Cash Flow

Cash flow from operating activities in the quarter was approximately $112.3 million, up 15.7% year over year. Capital spending amounted to $28.5 million, up from $12.0 million in the third quarter of 2010.

The company invested about 68.7% of the amount to upgrade its billboards business while the rest was spent for logo, transit, land and buildings, and operating equipment businesses. Free cash flow was $66.0 million versus $75.2 million in the third quarter of 2010.

Outlook

For the fourth quarter of 2011, management expects net revenue to be approximately $284.0 million and up roughly 2.5% on a pro forma basis.

Lamar Advertising Company is one of the largest owners and operators of outdoor advertising structures in the U.S. It provides advertising services to restaurants, retailers, automotive, real estate, health care, gaming, service, hotel and motel, telecommunication, and amusement industries, including entertainments and sports. The company faces stiff competition from Clear Channel Outdoor Holdings Inc. (CCO - Snapshot Report) and CBS Outdoor.

We currently maintain a Neutral recommendation on the stock.

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