Outdoor advertising had been holding up better than some of its competitors, but outdoor is now also being hit by the economic downturn. Wachovia analyst Marci Ryvicker reduced her estimates after hearing management tell the Deutsche Bank conference in New York “it’s ugly out there” and that business is pacing flat for 2008. In addition, they noted that Lamar management “does not have great expectations for 2009.”
Ryvicker noted that around 82% of Lamar’s business is local and that local advertising has been hit by rising gas prices, a depressed housing market and overall inflation. She noted that Lamar’s digital billboard business is doing fine, taking dollars away from newspapers, but that its traditional business (she called it “analog”) is facing challenges. So, Rivicker dropped her 2008 estimates to revenue growth of 0.5% (from +1.7%) and EBITDA to a decline of 2.4% (from -0.4%).
“While we think LAMR is a great company to own in an economic recovery, it is hard to justify a ~12x EBITDA multiple for a company with no growth. Plus, Street estimates (’08/’09) are still too high,” Ryvicker told clients.