Lamar Advertising Company (LAMR) is one of the largest outdoor advertising companies in North America, with over 352,000 displays across the United States and Canada. On the other hand, Clear Channel Outdoor Holdings, Inc. (CCO) owns, operates, and sells advertising displays in the United States and internationally. It operates through two segments, the Americas and Europe.
Outdoor advertising is marketing in public locations that promote services or products. As the lifting of COVID-19 restrictions has led to the recovery of outdoor visibility, the industry is witnessing a rebound. Moreover, increasing the adoption of digital technologies in outdoor advertising should drive the industry’s growth. The global outdoor advertising market is expected to grow at a CAGR of 3.6% to reach $33.1 billion by 2026. Therefore, both LAMR and CCO should benefit.
But which of these two stocks is a better buy now? Let’s find out.
Latest Developments
On May 19, 2022, LAMR announced that its board of directors had declared a quarterly cash dividend of $1.20 per share payable on June 30, 2022, to stockholders of record of its Class A common stock and Class B common stock on June 20, 2022.
On June 2, 2022, CCO announced a reimagined approach for brands to stand out and break through with consumers at the street level with its Out-of-Home Showcase Shelters, a fully-customizable advertising reboot of the traditional transit shelter. This could lead to increasing demand for its solution.
Recent Financial Results
LAMR’s net revenues increased 21.7% year-over-year to $451.39 million for the fiscal first quarter ended March 31, 2022. The company’s adjusted EBITDA grew 25.5% year-over-year to $191.25 million, while its net income came in at $92.15 million, representing a 140.4% year-over-year rise. Also, its EPS came in at $0.91, up 139.5% year-over-year.
CCO’s revenues increased 41.7% year-over-year to $525.69 million for the fiscal first quarter ended March 31, 2022. The company’s adjusted EBITDA came in at $66.10 million compared to a loss of $32.67 million in the prior-year quarter. Its net loss came in at $89.73 million, representing a 73.1% year-over-year decline.
Expected Financial Performance
Analysts expect LAMR’s revenue to increase 10.1% for the quarter ending June 30, 2022, and 10.7% in fiscal 2022. The company’s EPS is expected to grow 7.6% for the quarter ending June 30, 2022, and 28.2% in fiscal 2022. Moreover, its EPS is expected to grow at 3% per annum over the next five years.
On the other hand, CCO’s revenue is expected to increase 28.7% for the quarter ending June 30, 2022, and 16.4% in fiscal 2022. Its EPS is expected to grow 85.2% for the quarter ending June 30, 2022, and 83.9% in fiscal 2022. Also, the company’s EPS is expected to grow at 7% per annum over the next five years.
Profitability
CCO’s trailing-12-month revenue is 1.28 times what LAMR generates. However, LAMR is more profitable, with a gross profit margin and EBITDA margin of 67.79% and 44.54% compared to CCO’s 46.03% and 21.42%, respectively.
Furthermore, LAMR’s ROA and ROTC of 5.90% and 6.46% are higher than CCO’s 3.12% and 4.04%, respectively.
Valuation
In terms of forward EV/S, LAMR is currently trading at 7.13x, 147.6% higher than CCO’s 2.88x. Moreover, CCO’s forward EV/EBITDA ratio of 15.39x is 16.4% higher than CCO’s 13.22x.
So, CCO is relatively affordable here.
POWR Ratings
LAMR has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, CCO has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
LAMR has a B grade for Sentiment, consistent with analysts’ expectations that its EPS and revenue will increase in the upcoming months. On the other hand, CCO has a C grade for Sentiment, in sync with analysts’ expectations that its EPS will remain negative in the current quarter and year.
Of the 50 stocks in the B-rated REITs - Diversified industry, LAMR is ranked #2. However, CCO is ranked #6 out of 21 stocks in the D-rated Advertising industry.
Beyond what I’ve stated above, we have also rated the stocks for Growth, Value, Quality, Stability, and Momentum. Click here to view all the LAMR ratings. Also, get all the CCO ratings here.
The Winner
The outdoor advertising industry is expected to grow exponentially with increasing demand this year and beyond. While both LAMR and CCO are expected to gain, it is better to bet on LAMR now because of its higher profit margin and robust financials.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the REITs - Diversified industry here. Also, click here to access all the top-rated stocks in the Advertising industry.
LAMR shares . Year-to-date, LAMR has declined -22.32%, versus a -15.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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