Here's Why You Should Hold On To Lamar (LAMR) Stock For Now
Zacks Investment Research | Sep 11, 2017 12:11AM ET
Lamar Advertising Company’s (NASDAQ:LAMR) efforts to enhance its portfolio through strategic acquisitions bode well for the company’s growth. However, dreary market conditions continue to plague its bottom line.
Notably, Lamar holds significant market share in the U.S. outdoor advertising business. It is now focused on expanding its business and fortifying the company’s position by revamping its portfolio. The company has been upgrading its portfolio by adding high-quality assets. This will help Lamar increase occupancy in its existing advertising displays and raise advertising rates.
Recently, Lamar announced an all-cash acquisition of the assets of Steen Outdoor Advertising, for an undisclosed amount. The buyout includes around 460 billboard faces, of which 23 are digital bulletin faces. These are predominately located in Philadelphia, western New Jersey, Delaware and suburbs of Pennsylvania. This move will expand Lamar’s footprint in and around Philadelphia, as well as fortify the company’s media presence in the Northeast.
Moreover, the permits gained by Lamar from an acquisition are its trophy assets. This is because these permits allow out-of-home advertising at each location. Since there is a control on the permits, inventory as well as intrusion from other market players are restricted. This provides the company with a solid competitive edge.
The strengthening outdoor advertising industry is anticipated to support the company’s growth, going forward.
Continuous acquisitions of outdoor advertising assets play a crucial role in the company’s performance. As such, increased capital expenditures and elevated expenses related to the acquired assets will likely reduce free cash flow and strain Lamar’s margins. This, in turn, is expected to mar its financial performance.
In addition, Lamar’s performance in second-quarter 2017 was adversely affected by the lackluster national advertising market. Particularly, the automotive and gaming categories were affected. The market is likely to remain choppy in the near term as well amid the challenging macro environment for advertisement spending. This is expected to take a toll on the company’s profits.
Also, Lamar has underperformed its Zacks Investment Research
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