Radio and outdoor joined at the hip


Billboards don’t seem to be very similar to radio broadcasting, at least not as far as technology is concerned, but their advertising trends are very similar. Thus, Wells Fargo Securities analyst Marci Ryvicker is boosting her estimates for Lamar Advertising based, in part, on the improving trends for radio.

In addition to raising financial expectations, Ryvicker has also raised Lamar to “outperform” and is urging clients to buy the pure play outdoor stock.

“Recent data points from public and private companies across local [advertising] industries suggest that advertising continues to accelerate in Q1. Given LAMR’s lack of secular challenges and ‘pure’ advertising exposure (85% local and 15% national), we would take advantage of the recent pullback to buy LAMR at a favorable entry point. We took a detailed look at our earnings model (’09E thru ’15E) to come up with a fair valuation based on what we deem to be conservative assumptions. Our conclusion – LAMR’s analog business is worth ~$33-35/share, while digital can conservatively add $7/share. We are raising our valuation range to $40-42 from $30-32 and upgrading to Outperform. Our ’09 and ’10 EPS estimates increase to -$0.60 and -$0.46 from -$0.61 and -$0.50, respectively,” Ryvicker said in her upgrade announcement.

“Our analysis of radio trends can be extrapolated to LAMR,” the analyst wrote. “Comparing LAMR’s top line trends to other traditional media, we found the greatest similarity with radio. Our radio contacts tell us Q1 started strong and should be positive, which bodes well for LAMR, in our view.”

Lamar has yet to report its Q4 results. Ryvicker currently anticipates that Q4 revenue will be down 5% for the outdoor company, a bit better than Lamar’s official guidance of down 7%. She is looking for Q1 to be flat with a year ago, but says that may prove to be conservative.

RBR-TVBR observation: Whenever people talk about “new media” wiping out the old, just ask them to cite an example. You can’t get much older than billboards (signs along a road) when it comes to advertising, but they’re still around and growing, particularly with the new digital displays. TV didn’t kill radio. DVDs didn’t kill movie theaters. And so far nothing has killed newspapers.