Lamar Advertising Posts Okay 3Q Results & Outlook

MKM Partners continue to lack near-term conviction following an in line quarter and soft guidance. Lamar's LAMR 3Q10 results were in line with expectations while 4Q10 revenue guidance came in a bit below consensus expectations. Bullish investors are likely to be excited about the ramp in digital in 2011, but the projection of 280-300 new units was on par with our forecast. Top line growth in 3Q10 of 5.3% was again modest relative to other media, as results continue to be curtailed by sluggishness in the small/local business market. MKM Partners positively views Lamar's digital ramp slated for 2011, as some uncertainty surrounding its near-term digital build-out has been alleviated. It continues to watch for the release of Phase II of the FHA report on digital billboard safety, which is likely to be released later this year. It believes the outcome of the report could have a significant impact on the digital regulatory environment and hence on Lamar's longer-term digital growth trajectory. MKM is making a modest upward revision to our estimates to reflect 4Q10 guidance. MKM's price target is based on a 10x multiple to our 2011 Adjusted EBITDA estimate of $500 million. MKM has a Neutral rating and $32 PT on LAMR LAMR closed Thursday at $33.50