Billboards play a critical role in the success and growth of Lamar Advertising (NASDAQ: LAMR), which depends on demand for the advertising spaces it owns. Year after year, Lamar has continually grown on all fronts and coming into its Aug. 9 second-quarter earnings report, Lamar shareholders knew the company would once again beat the estimates. Lamar's results did not exceed expectations on all fronts, but growth in almost all categories showed investors the company is still performing. Let's see what Lamar said about its results and where their business is heading.
Exceeding Expectations
Lamar's second quarter results were positive, although the company did not exceed expectations and estimates on the level they had in the past. Revenue was up 12.6% year-over-year. Yet, net revenue ticked up 3.5% and earnings came in at 84 cents per share. That was roughly one cent higher than the 83 cents per share investors were expecting.
Taking a deeper look at the numbers, Lamar did exceed many of their own expectations. The company saw digital revenue increase 5.1% for the quarter and saw AFFO per share increase 12%. Yet overhead was up 1.8%. Lamar said that its increase in digital units, up 221 units for the year, has been exceeding their own expectations. In addition, every one of the categories was up, with the only down category being retail, which was down 1% in the second quarter.
Lamar CEO Sean Eugene Reilly was pleased with the key AFFO per share metric, though he also sees business softening. "We're pleased to report a strong second quarter all the way around, particularly in key AFFO per share metric," Reilly said. "And as we move into the back half of 2016, we're quite comfortable with our previously issued full year AFFO per share guidance. That guidance reaffirmed, we have seen a slight softening of activity of late and are consequently guiding to low single-digit pro forma revenue growth for Q3, a little bit below the pace of Q2." The CEO pointed out that it was the New York City entertainment market that was particularly weak and inconsistent.
Can Lamar Keep the Momentum?
With a reputation of delivering strong quarterly results, Lamar did not offer any increased guidance on the call. Going forward, Lamar sees low single-digit pro forma revenue growth for the third quarter, which is below the pace of the second quarter. But, the company did keep their full year AFFO guidance unchanged. Reilly said that the update reflects softening the company is seeing in the company's business.
Lamar acknowledged that the Clear Channel acquisition played a role in its digital performance. But, during the call, Reilly said Lamar is not going to stop pursuing acquisitions, particularly of "high quality REIT qualified assets." Pursuing quality when it comes to the acquisition of assets, on both the local and national level, will allow the company to continually grow.
In response to the better than expected results, Lamar shares dropped, falling over 5% a few hours after the earnings report. With the advertising industry showing no signs of slowing down, Lamar has positioned itself to be in the right place at the right time and has not stopped expanding or acquiring new space.
Disclosure: No position in the stock mentioned.
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