Lamar Misses Estimate, Improves Y/Y

Lamar Advertising Co. (LAMR - Analyst Report) reported net income of $7.2 million or 8 cents per share in fourth quarter 2012 compared with $6.4 million or 7 cents per share in the year-earlier quarter. Although earnings in the reported quarter increased year over year, it missed the Zacks Consensus Estimate by 3 cents.

For full year 2012, the company reported net income of $9.8 million or 10 cents per share versus $8.6 million or 9 cents per share in the previous year. Earnings for 2012 fell short of the Zacks Consensus Estimate by 4 cents.

Net revenues for the reported quarter increased 6.0% year over year to $305.5 million. This resulted in a considerable rise in operating income (39.2%) in fourth quarter 2012 compared with the year-ago period, despite relatively high operating expenses. For full year 2012, net revenues were $1.2 billion vis-à-vis $1.1 billion in the prior year, while operating income climbed to $217.7 million from $186.4 million in 2011.

Adjusted EBITDA for fourth quarter 2012 were $135.8 million versus $125.8 million in the year-ago quarter. For full year 2012, adjusted EBITDA aggregated $514.4 million compared with $487.1 million in the preceding year.

During the reported quarter, Lamar Advertising acquired the outdoor advertising subsidiary of NextMedia Group Inc., a leading media company, for $145 million in cash. The company funded the acquisition through a debt offering of $535 million of 5% senior subordinated notes due 2023, which resulted in net proceeds of approximately $527 million.

At year-end 2012, Lamar Advertising had a liquidity of $301.2 million, which included $242.3 million availability under its revolving senior credit facility and $58.9 million in cash and cash equivalents. Total debt, including current maturities, was relatively stable at $2.2 billion.

Free cash flow in the reported quarter was $71.9 million compared with $63.9 million in the year-ago quarter. For full year 2012, free cash flow increased 19.0% year over year to $267.5 million.

For the first quarter of 2013, management expects net revenue within the $282-$285 million range. We remain bullish about the long-term prospects of the company.

However, Lamar Advertising should remain wary of stiff competition from other players in the industry such as Clear Channel Outdoor Holdings Inc. (CCO - Snapshot Report), Publicis Groupe SA (PUBGY), and AirMedia Group Inc. (AMCN - Snapshot Report). Lamar Advertising currently has a Zacks Rank #3 (Hold).