Lamar (LAMR) Converts into REIT, Should You Invest in It? - Analyst Blog

Lamar Advertising Co. (LAMR) recently completed the ultimate stage in the reorganization of its business operations for qualifying as a real estate investment trust ("REIT") by merging with and into its wholly owned subsidiary, Lamar Advertising REIT Company. We believe the company's REIT conversion move to capitalize on a seemingly more favorable tax environment is a strategic fit to drive long-term growth.

Early this month, Lamar reported third-quarter 2014 earnings of 37 cents per share, missing the Zacks Consensus Estimate by a penny. Nevertheless, the figure came above the prior-year quarter earnings of 18 cents per share. This was attributable to a notable improvement in revenues and operating income.

Lamar boasts an impressive national footprint and is a leading provider of logo signs in the U.S.  It has a diversified tenant base and operates in a high-barriers-to-entry market due to permit restrictions.  

However, there exists headwinds on the national level, particularly, in terms of national ad spend. So despite the company generating 78% of its revenues from local business, we believe this weakness may partly impede the company's growth momentum. Also, issues surrounding interest rate remains a looming concern for REITs.

Over the last 7 days, the Zacks Consensus Estimate for 2014 and 2015 remained unchanged at 90 cents and $1.57 per share, respectively. Lamar currently has a Zacks Rank #3 (Hold).

To gain a deeper insight into Lamar, you can refer to our updated research report issued on Nov 27, 2014.

Stocks That Warrant a Look

Investors interested in the REIT industry may consider better-ranked stocks like Cousins Properties Incorporated (CUZ), Prologis, Inc. (PLD) and Duke Realty Corporation (DRE). All these stocks hold a Zacks Rank #2 (Buy).

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