Shares of Lamar Advertising Company (LAMR - Free Report) have been performing well, of late. In the past month, the stock has rallied 6.1%, while the industry has gained 3.3%.
This rally is anticipated to continue in the near term, as there are a number of favorable factors.
In first-quarter 2018, Lamar reported adjusted funds from operations (FFO) per share of 98 cents per share, marking an 11.4% increase from the year-ago tally of 88 cents. Results were driven by growth in revenues. Particularly, net revenues for the reported quarter climbed 4.2% from the prior-year quarter to $361 million.
Key Driving Factors
Focus on portfolio expansion: While the company holds significant market share in the U.S. outdoor advertising business, Lamar is continuously expanding its business. For 2018, management expects digital deployment to be more than 200 new digital units. Further, leveraging on the fragmentation of the advertising media segment, the company is expanding its footprint. In first-quarter 2018, the company completed acquisitions for total price consideration of nearly $6.6 million. These strategic moves will enable the company to enjoy solid revenue growth in the upcoming quarters.
Superior ROE: Lamar’s return on equity (ROE) is 27.02% compared with the industry’s average of 4.9%. This indicates that the company reinvests more efficiently compared to the industry.
Estimate Revisions: The stock has seen the Zacks Consensus Estimate for the current-year FFO per share being revised 1.3% upward to $5.34 in a month’s time. Also, the Zacks Consensus Estimate for the second quarter has moved up, over the past month. This reflects analysts’ bullish sentiments on the stock.
Strong cash flow per share: The company generates cash flow per share of $5.43 as compared to the industry’s average of $1.9. This makes us optimistic about Lamar’s operating performance for the long term.
Valuable permits serve as trophy assets: Lamar operates in an industry that is characterized by high barriers to entry due to permitting restrictions. This is because the company typically owns permits that allow out-of-home advertising at each location and in fact, the permits are the most prized assets gained from acquisitions. Hence, control on the permits restricts inventory built-up, as well as the intrusion from other market players, both local and national. This provides the company with a solid competitive edge.
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 Key Picks
Other similarly-ranked stocks from the same space are Arbor Realty Trust (ABR - Free Report) , Chatham Lodging Trust (CLDT - Free Report) and Prologis, Inc. (PLD - Free Report) . All three stocks carry a Zacks Rank of 2.
Arbor Realty Trust’s Zacks Consensus Estimate for 2018 FFO per share has risen 14.4% to $1.03 in a month’s time. Its shares have returned 16.2% over the past year.
Chatham Lodging’s FFO per share estimates for the current year have inched up 1% to $1.93 in the past month. Its shares have gained 4.5% in a year’s time.
Prologis’ FFO per share estimates for 2018 have moved up 0.7% to $2.98 over the past month. Its shares have gained 15.7% over the past year.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>