Lamar Advertising Company’s LAMR impressive footprint of outdoor advertising assets across the United States and Canada positions it well to ride the growth curve. An unmatched logo signs business, a diversified tenant base across various sectors and a focus on local businesses assure stable revenues. Efforts to expand the digital platform and technological advancements in the low-cost, out-of-home (OOH) advertising platform also bode well for long-term growth.

However, expected choppiness in the national business in the near term and competition from other outdoor advertisers and other forms of media raise concerns.

What’s Aiding Lamar?

Lamar enjoys a diversified tenant base comprising tenants from the services, health care, restaurants, retailers, automotive, insurance and gaming categories. Apart from this, the company sources a significant part of its revenues from local businesses, with a diversified base of tenants. This generally leads to less volatility in revenues.

Over the recent years, LAMR has made efforts to upgrade its portfolio, increasing occupancy in its existing advertising displays and enabling it to enjoy a significant market share in the U.S. outdoor advertising business. The company's increased focus on bolstering its digital capabilities augurs well for long-term growth. Particularly, the growing digital platform allows Lamar to tap into expanding programmatic advertising channels.

It offers customers the largest network of digital billboards in the United States, with around 4,800 displays as of the end of the third quarter of 2024. The company has added a large number of digital screens through acquisitions and internal conversions over the past several years.

OOH advertising has been growing at a rapid pace and continues to increase its market share in comparison with other forms of media. Importantly, the cost of advertisement through this medium is also comparatively lower than other media. Moreover, fragmentation across other advertising media and technological advancements in the OOH segment are aiding the shift to outdoor advertising. In the upcoming years, higher technology investments are expected to provide further support to OOH advertising. Therefore, the company’s expansion activities over the recent years bode well for long-term growth.

Solid dividend payouts remain the biggest attraction for REIT investors, and Lamar remains committed to the same. In the last five years, the company has raised its dividend eight times, and its five-year annualized dividend growth rate is 18.94%, which is encouraging. Such efforts raise investors’ optimism in the stock.

Shares of this Zacks Rank #3 (Hold) company have gained 9.6% over the past six months, outperforming the industry’s upside of 0.3%.

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What’s Hurting LAMR?

Lamar Advertising faces competition from other outdoor advertisers for customers, display locations and structures. The company also competes with other forms of media, such as television, radio, print media, direct mail marketers and online, mobile & social media platforms. These diversified competitors have the advantage of cross-selling complementary advertising products to advertisers. So, despite a significant portion of its revenues coming from local businesses, we believe this competition from national players may partly impede its growth momentum.

Though local and regional sales grew for the 14th consecutive quarter in the third quarter of 2024, the company’s national business continues to be a headwind for its overall revenue growth.

Stocks to Consider

Some better-ranked stocks from the REIT sector are Welltower WELL and SL Green Realty SLG, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Welltower’s 2025 FFO per share has raised two cents in the past month to $4.79.

The Zacks Consensus Estimate for SL Green’s 2025 FFO per share has moved 1.3% north in the past month to $5.51.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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