Baton Rouge-based Lamar Advertising Co. reported net income dropped to $15.4 million, or 16 cents per share, compared with $23.1 million, or 24 cents per share, a year ago.
However, the 2014 results included a $20.8 million loss for retiring debt, which was partially offset by lower interest expenses.
Lamar is converting to a real estate investment trust. The trusts don’t have to pay corporate income taxes on profits if at least 90 percent of profits go to shareholders.
When viewed by the metrics that measure the trusts’ performance, Lamar’s results look quite a bit different.
Lamar’s adjusted funds from operations, which REIT investors use instead of net income, rose to $102.9 million, or $1.08 per share, compared with $99.7 million, or $1.05 per share.
Adjusted funds from operations includes the costs for maintaining the trust’s underlying assets. It is considered a better predictor of a REIT’s ability to pay dividends.
Despite “a sluggish overall ad environment,” Lamar improved local sales and the performance of its digital billboards accelerated, Chief Executive Officer Sean Reilly said.
There are other reasons for optimism.
On Tuesday, Lamar announced it would acquire New Orleans-based Marco Outdoor Advertising Inc. and its more than 150 signs for an undisclosed amount of cash.
Most of Marco’s signs are in the New Orleans area, along the Pontchartrain Expressway and other major routes into the city, as well as in the north shore area.
Reilly described Marco as “a jewel” and the company’s signs as “high-quality assets” during a Thursday conference call with stock analysts and investors.
The deal will add about 2 cents to Lamar’s 2015 adjusted funds from operations, Reilly said.
And Lamar isn’t done with acquisitions, he said.
“We’ve probably got a pipeline that’s going to end up the year at around $70 million in those types of sort of smaller tuck-in acquisitions,” Reilly said.
In addition, some larger outdoor advertisers will hit the market, and Lamar will be a player for those firms, he said.
The results fell short of Wall Street’s expectations. Stock analysts surveyed by Thomson Reuters had forecast per-share earnings of 37 cents per share on revenue of $333.2 million. Lamar had revenue of $330.4 million.
Meanwhile, Lamar said it expects third-quarter revenue in the range of $330 million to $334 million, an increase of 1.5 percent to 2.5 percent over the same period in 2013.
Lamar’s stock closed down 37 cents, or 0.8 percent, to $49.70.
Follow Ted Griggs on Twitter, @tedgriggsbr.