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. A diversified tenant base assures 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 and competition from other outdoor advertisers raise concerns.

Last month, the company reported a fourth-quarter 2024 adjusted funds from operations (AFFO) per share of $2.21, which met the Zacks Consensus Estimate. The figure also compared favorably with the prior-year quarter's tally of $2.10. Results reflected year-over-year growth in the top line. However, higher direct advertising and general and administrative expenses during the quarter acted as a dampener.

What is Aiding Lamar?

Lamar enjoys an impressive national footprint and holds a leading position as a provider of logo signs in the United States. The company enjoys a diversified tenant base comprising tenants from the services, health care, restaurants, retailers, automotive, insurance and gaming categories. This aids in stable revenue generation.

Lamar's increased focus on bolstering its digital capabilities augurs well for long-term growth. The company has added a large number of digital screens through acquisitions and internal conversions over the past several years. It offers customers the largest network of digital billboards in the United States, with around 5,000 displays as of the end of the fourth quarter of 2024.

OOH advertising has been growing at a rapid pace and continues to increase its market share in comparison with other forms of media. The cost of advertisement through this medium is comparatively lower than other media. 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. In 2024, it completed multiple acquisitions for an aggregate purchase price of approximately $45.4 million.

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 nine times and its five-year annualized dividend growth rate is 21.16%, which is encouraging. Such efforts raise investors’ optimism in the stock.

What is Hurting LAMR?

LAMR 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. Despite a significant portion of the company’s revenues coming from local businesses, we believe this competition from national players may partly impede its growth momentum.

Local and regional sales grew for the 15th consecutive quarter. However, the choppiness in the company’s national business continues to be a headwind for its overall revenue growth.

Shares of this Zacks Rank #3 (Hold) company have declined 9.2% over the past three months against the industry’s upside of 4.5%. Analysts seem bearish on this stock, with the Zacks Consensus Estimate for its 2025 FFO being revised southward by 1.8% over the past month.

Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks from the REIT sector are Welltower WELL and Cousins Properties CUZ, 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 moved 1 cent up in the past week to $4.90.

The Zacks Consensus Estimate for Cousins Properties’ 2025 FFO per share has moved 1.1% north in the past week to $2.79.

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Lamar Advertising Company (LAMR) : Free Stock Analysis Report

Cousins Properties Incorporated (CUZ) : Free Stock Analysis Report

Welltower Inc. (WELL) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research