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We recently maintained a Neutral recommendation on Louisiana-based Lamar Advertising Company (LAMR - Analyst Report), a leading owner and operator of outdoor advertising structures in the U.S.

Lamar has developed its localized billboard advertising businesses through a combination of organic growth and strategic acquisitions. As of August 8, 2012, the company had 1,564 digital displays including 852 bulletins and 712 posters.

Internal and external investments have been the company’s primary tool all along to capture a considerable share of localized outdoor advertising markets. The company invested roughly $107 million in 2011 and $29.8 million in the second quarter 2012 to improve its existing displays and construct new advertising structures.

Lamar recently came out with its second quarter 2012 results and reported earnings per share of 15 cents; in line with the Zacks Consensus Estimate and an improvement over earnings of 12 cents reported in the year-ago comparable quarter.

Top line grew 3.9% year over year to $305 million, slightly above the company’s guidance of $303 million. Organic revenue growth was 3.6% in the quarter as compared with 3% projected by management.

We expect upsides going forward, as the company builds its national sales presence and establishes relationships with larger and national advertisers. All these positive factors notwithstanding, difficulties in obtaining loans, higher payroll and site lease expenses can be challenging for small and midsized businesses which in turn restrict their advertisement spending, limiting growth opportunities for companies like Lamar.

Moreover, enhanced capital expenditure and intensifying competition from peers like Clear Channel Outdoor Holdings Inc. (CCO - Snapshot Report) keep us on the sidelines for Lamar.

The current Zacks Consensus Estimate for earnings per share for the third quarter of 2012 is 15 cents per share, which reflects a year-over-year growth of 263.6%. Estimates for 2012 and 2013 are 15 cents and 58 cents, representing annual growth of 640.9% and 289.2%, respectively.

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