Lamar Loss Shrinks, Misses Estimate - Analyst Blog

Lamar Advertising Company (LAMR) reported its financial results for the second quarter of 2010. Net loss reported in the quarter was $8.9 million compared with a loss of $11.8 million reported in the second quarter of 2009. Earnings per share (EPS) were a loss of 10 cents versus a loss of 13 cents in the year-ago quarter. The reported EPS was lower than the Zacks Consensus Estimate of a loss of 5 cents.
 
Revenue
 
In the second quarter, 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 revenues increased 3.7%, registering a hike of 170 basis points over the company’s guidance of a 2.0% rise.
 
Margins
 
As a percentage of revenues, operating expenses dipped 480 basis points. Operating income in the quarter was $49.3 million, up from $34.0 million in the comparable quarter of 2009. Operating margin improved to 17.2% versus 12.4% in the year-ago quarter. Interest expense declined 17.7% year over year to $46.6 million in the quarter.
 
Balance Sheet
 
Exiting the second quarter, Lamar Advertising had cash and cash equivalents of approximately $26.9 million compared with $89.9 million in the first quarter of 2010. Total debt, including current maturities decreased roughly 1.9% sequentially to $2,547.0 million from $2,597.3 million in the first quarter of 2010.
 
Cash Flow
 
Cash flow from operating activities was approximately $85.5 million versus $97.1 million in the second quarter of 2009. Capital spending decreased by 35.6% year over year to $7.3 million compared with $11.4 million in the second quarter of 2009. Free cash flow in the quarter was $80.7 million versus $62.8 million in the year-ago quarter.
 
Outlook

For the third quarter of 2010, management expects net revenues to be approximately $284.0 million and up roughly 4.0% on a proforma basis.
 
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.
 
We currently maintain a Neutral recommendation on the stock, which is supported by Zacks #3 (Hold) Rank.