Earnings Preview: Lamar Advertising Company

Lamar Advertising Company (LAMR) is expected to report Q2 earnings before market open Wednesday, August 6, with a conference call scheduled for 11:00 a.m. ET.

Guidance

Analysts are looking for a profit of 15c on revenue of $318.98M. The consensus range is 12c to 21c for EPS, and revenue of $316.76M to $322.4M, according to First Call. For Q2, Lamar forecast revenue of about $316M to $319, excluding any revenue from Vista Media, below First Call consensus estimates.

Analyst Views

In July, Morgan Stanley cut its price target to $48 from $53 to reflect continued economic weakness, local media revenue that were declining and generally missing revenue, and comments by the company's management that its forward revenue outlook appeared flat. The firm, which affirmed its Overweight rating and cut its pro forma revenue growth outlook on the company to 1.6% from 2.4% for 2008, said there is very limited downside and the long-term valuation point appears compelling, but does not expect a "significant" rebound in growth to occur until 2009.

CL King downgraded the company to Accumulate from Strong Buy and also cut its price target to $41 from $48. Zacks, which has a Buy rating on shares, noted that the outdoor advertising industry is growing, as consumers spend most of their time away from home. Additionally, the firm said the company is benefiting from the rebound in pricing for local advertising and a stronger billboard business.

However, the firm added that increased capital expenditures in the effort to digitize signs, higher expenses related to the recently acquired outdoor advertising assets, and higher interest expense from the increased debt level are reducing free cash flow.

Comments

[Momo:]

I don't understand why LAMR is not going down to 4-5$? considering the almost zero growth, the very low ROE (3.6%, they better just put the money in the bank...) and low to nothing net income ==> it should not be trading at a P/E ratio of over 100. Especially not at times like these. Can some one explain this abnormality?

2008 Aug 05 02:06 PM

[jsun:]

Momo, I have been wondering the same thing for the past couple months after finding LAMR in a stock screen of high PE and high debt/equity ratio companies.

LAMR's valuation is ridiculous. Look at Google, also in the ad space, but online ads able to reach millions of people without the equipment cost of billboards. Yet Google's PE is what, 30-ish?

And really...when is the last time you saw a billboard that influenced you to buy something? I don't even remember what billboards I pass by. LAMR is being propped up by insider buying by SPO Advisory Corp; they have been riding the stock all the way down from the $50's. SPO also has some other "winning" investments. sarcasm there) What they see in LAMR or whether they have some affiliation with the LAMR execs I don't know. Wall St has been way too gentle on this stock. Who is going to pay for more expensive digital signs when the consumer is in retreat due to this economy?

Insane, absoluetly insane. LAMR should be trading at $12.

2008 Aug 05 06:53 PM