Thursday, January 28, 2010

Lamar: Advertising Angst

By Eric Jackson
RealMoney Contributor

1/28/2010 12:45 PM EST
Click here for more stories by Eric Jackson

Lamar Advertising Company (LAMR - commentary - Trade Now) is a Baton Rouge-based national outdoor advertising company (with some digital operations), which took a significant hit to its stock price after Lehman's collapse a year and a half ago. Investors sold the stock as it became clear that the economy -- and with it the ad market -- would slump on the heels of the collapse on Wall Street. The stock dropped from $37 in early September 2008 to $14 by the end of 2008.

In the dark days of early 2009, the stock continued its decline, dropping to a March 2009 low of $5.59. When confidence grew in the government's steps to stabilize the financial markets, the worst-performing shares over the preceding six months became the best-performing ones. Stocks like Lamar, which were seemingly near death, rallied aggressively. From Mar. 9, 2009, to Jan. 6, 2010, the stock rallied 500% to over $33. Today, the stock is down to $29.

What was, and still is most worrying about Lamar, though, is not its exposure to a form of advertising now much less in demand (outdoor billboards and posters) than web, TV, or radio, but its debt. Lamar was carrying about $2.7 billion in long- and short-term debt as of the end of September 2009. We'll find out where that tally currently stands in about three weeks, when it releases its fourth-quarter and full-year results. The company's debt is about equal to its market capitalization.

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