Lamar Advertising's Acquisitions To Fuel Growth In 2019
Zacks Investment Research | Dec 25, 2018 11:48PM ET
Lamar Advertising Company (NASDAQ:LAMR) is making concerted efforts to incubate its business and increase market share in the U.S. outdoor advertising business. Amid increasing popularity of this advertisement medium, on account of technological advancements in the outdoor segment and its wider reach, the company’s focus to expand market share is a strategic fit.
Most recently, Lamar announced the acquisition of the billboard operations of Fairway Outdoor Advertisingfrom GTCR, LLC, for $418.5 million. Through this buyout, the company adds more than 8,500 high-quality billboards, including more than 135 digital displays.
Further, the all-cash acquisition strengthens its position in five U.S. markets — Greenville/Spartanburg, SC, Raleigh-Durham, NC, Greensboro/Winston-Salem, NC, Athens, GA, and La Crosse, WI.
Per management, the acquisition will be accretive for the company’s 2019 revenues, contributing nearly $70 million in revenues for 2019. Additionally, projected organic sales growth of more than 5% in fourth-quarter 2018, will further boost the company’s growth.
Notably, Lamar anticipates to realize around $4 million in synergies in 2019 through this transaction.
Furthermore, Moody’s Investors Service — the rating division of Moody’s Corporation (NYSE:MCO) — reiterated the company’s ratings following the acquisition. The rating agency believes the pro forma leverage will increase to 4x from 3.7x as of third-quarter 2018 (excluding Moody's standard lease adjustments). However, this could decrease below 4xfrom continued EBITDA growth absent future buyouts.
Per Moody’s, the Fairway billboardtransaction will be funded with $215 million from Lamar’s $450-million revolving credit facility, cash from the balance sheet,and $175 million from a new AR securitization facility which is not being rated by Moody's.
These efforts of the company will likely drive long-term profitability. Furthermore, the company remains committed to share its growth with shareholders and recently announced a 5.2% hike in dividend distributions. Particularly, Lamar anticipates disbursing $3.84 per share in quarterly distributions to stockholders in 2019, an increase from $3.65 paid in 2018.
Hence, this Zacks Rank #2 (Buy) company remains well poised to capitalize on the outdoor advertising industry’s encouraging prospects and benefit shareholders accordingly.
Over the past six months, shares of Lamar have declined 3.9%, narrower than its Zacks Investment Research
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