Earnings Preview: Lamar Advertising - Analyst Blog

Lamar Advertising Company (LAMR) is slated to release its third quarter 2010 results on Thursday, November 4. The current Zacks Consensus Estimate for the third quarter projects a break-even earnings level, representing an annualized growth of 109.23%.   

Considering the earnings surprise, Lamar Advertising has outperformed the Zacks Consensus Estimate in all the preceding four quarters. The average surprise stands at 85.74%, reflecting the magnitude of out performance in the trailing four quarters.

Second Quarter Highlights

Lamar Advertising's second quarter results improved as the company reported a net loss of $8.9 million, down from a loss of $11.8 million reported in the second quarter of 2009. Earnings per share were a loss of 10 cents, an improvement from a loss of 13 cents in the year-ago quarter. However, the reported EPS fell short of the Zacks Consensus Estimate of a loss of 5 cents.

Net sales were $286.4 million, up 4.2% year over year from $274.7 million in the comparable quarter of 2009. Results also exceeded the Zacks Consensus Estimate of $282.0 million and the company's forecast of $282.0 million.

On a proforma basis, net revenue increased 3.7%, registering a hike of 170 basis points over the company's guidance of a 2.0% rise.

Detailed discussion on the second quarter results can be found here: Lamar Loss Shrinks, Misses Estimate

Agreement of Estimate Revisions   

In the last 30 days, there were two positive revisions in earnings estimate for the fiscal year 2010 and one for 2011. Third quarter estimate was revised upward by one analyst.

Positive revision incorporates expectations of growth in advertising as the global economy revives for the recent crisis. Stronger billboard business and increase in local demand will be the prime growth catalysts.

Magnitude of Estimate Revisions   

Accounting for the positive revisions in the last 30 days, earnings per share estimate for the fiscal year 2010 improved by a cent to a loss of 43 cents, implying a year-over-year growth of 33.29%.

Estimates for 2011 were stable at a loss of 2 cents per share, representing a growth of 94.81%.

Our Take   

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.

Expectations are high of yet another successful quarter as the company gradually revives from the adverse impacts of the global meltdown. For the third quarter of 2010, management expects net revenue to be approximately $284.0 million and up roughly 4.0% on a proforma basis.

Demand for digital billboards advertising is seen to be rising, a positive for Lamar's future. However, static demand for traditional billboards can be a cause of concern. Moreover, digital advertising happens to be more attractive as an advertisement source than the traditional ones.

The company's major revenue source, small and medium-sized business still remains in a difficult position, facing problems in obtaining business loans. This can affect Lamar's capital spending on advertisement and thus its future prospects.

We currently maintain a Neutral recommendation on the stock.