LAMR - Embedded Expectations Analysis - 2021 08 25
Lamar Advertising Company (REIT) (LAMR:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 26.7x Uniform P/E, implying bullish expectations for the firm. However, although management's concerns about same-store revenue, operating expenses, and AFFO guidance suggest the potential for near-term headwinds, market expectations are still too pessimistic, and long-term equity outperformance is warranted.Specifically, management may lack confidence in their ability to sustain steady performance in their logo business, maintain same-store sales growth, and continue growing digital revenues. In addition, they may be overstating the volume in their acquisition pipeline and they may have concerns about returning to a typical capital expenditure program. Finally, management may lack confidence in their ability to sustain operating expense reductions, meet adjusted funds from operations (AFFO) guidance, and maintain ample access to both debt and equity capital markets.
Although management's concerns about same-store revenue, operating expenses, and AFFO guidance suggest the potential for near-term headwinds, market expectations are too pessimistic given the firm's leadership positioning and billboard digitization strategy, and long-term equity outperformance is warranted.
Lamar Advertising is a real estate investment trust and an outdoor advertising company. The company leases space for advertising on billboards, buses, shelters, benches, logo plates and in airport terminals. The company's outdoor advertising displays are: billboards, in which the company leases its advertising space on bulletins and posters; logo signs, which erects logo signs that advertise nearby gas, food, camping, lodging and other attractions, and directional signs that direct vehicle traffic to nearby services and tourist attractions, near highway exits; and transit advertising displays, in which the company rents transit advertising displays in airport terminals and on bus shelters, benches and buses.
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