Lamar Cuts Q1 Loss - Analyst Blog

Lamar Advertising Co. (LAMR) reported lackluster first-quarter 2014 results with a loss of $4.9 million or loss of 5 cents per share compared with a loss of $10.3 million or loss of 11 cents per share in the year-earlier quarter. Although loss for the reported quarter improved year over year, it miserably failed to meet the Zacks Consensus Estimate of an earnings of 7 cents.

Quarter Details

Net revenues for the reported quarter increased to $284.9 million from $276.6 million a year ago. The quarterly revenues for first-quarter 2014 missed the Zacks Consensus Estimate of $291 million. Despite top-line growth, the quarterly loss is primarily attributable to debt extinguishment and impairment charges, and high interest burden.

Operating income increased to $31.1 million from $19.1 million in the prior-year quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the reported quarter were $104.4 million, up from $103.1 million in the comparable period last year.

During the quarter, Lamar received the approval from the Internal Revenue Service (IRS) for REIT (real estate investment trust) conversion. Consequently, the company reported FFO (funds from operations) and AFFO (adjusted funds from operations) figures for the quarter along with the press release.

FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. In the reported quarter, FFO increased 1.8% year over year to $60.4 million. AFFO for the first quarter of 2014 were up 17.2% to $58.8 million.

Cash Flow & Balance Sheet                      

Lamar had liquidity of $461.7 million at quarter end, of which $393.0 million was available under its $400 million revolving senior credit facility and $68.7 million in cash and cash equivalents. Lamar had a long-term debt of approximately $1.9 billion including current maturities.

Free cash flow in the reported quarter improved 18.6% year over year to $51.1 million. Lamar defines free cash flow as adjusted EBITDA less interest, net of interest income and amortization of financing costs, current taxes, preferred stock dividends and total capital expenditures.

Guidance

For the second quarter of 2014, management expects adjusted net revenue in the range of $331 million to $334 million, rising 1% to 2% on a pro-forma adjusted basis.

Lamar currently has a Zacks Rank #3 (Hold). Other players in the industry worth considering include The Interpublic Group of Companies, Inc. (IPG), Publicis Groupe SA (PUBGY) and Sizmek Inc. (SZMK), each carrying a Zacks Rank #2 (Buy).