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Buy These 2 Diversified REITs Before They Boom

Amid heightened market uncertainty, Real Estate Investment Trusts (REITs) have been gaining investors’ attention because of their resilience. They are considered safe investments in uncertain times, as they need to pay at least 90% of their taxable income as dividends. Also, REITs provide natural protection against inflation. Thus, it could be wise to invest in diversified REITs Crown Castle (CCI) and Lamar Advertising (LAMR) before they soar. Read on…

Despite coming in lower than estimates in July, inflation remains at discomforting levels for the policymakers. As supply-chain disruptions and high energy prices are expected to keep inflation elevated, the Federal Reserve has reiterated its tough stance against inflation. The central bank signaled to raise interest rates aggressively until inflation reached the 2% goal.

This is expected to keep the stock market under pressure in the near term. However, Real Estate Investment Trusts (REITs) are gaining significant attention amid the uncertainties surrounding the economy because they typically benefit from an inflationary environment, with the values of properties owned by them rising.

Also, REITs help generate a steady income stream as they must pay at least 90% of their income as dividends.

Given this backdrop, investors could consider investing in fundamentally strong diversified REITs Crown Castle Inc. (CCI) and Lamar Advertising Company (LAMR) before they soar.

Crown Castle Inc. (CCI)

CCI owns, operates, and leases more than 40,000 cell towers and approximately 80,000 route miles of fiber supporting small cells and fiber solutions across the U.S. market. Its business provides access, including space or capacity, to its shared communications infrastructure via long-term contracts in various forms, including lease, license, sublease, and service agreements.

On July 9, 2022, the company increased its revolving credit facility commitments to $7 billion and extended the maturity of the existing facilities to July 2027. With such significant liquidity, the company is well positioned to pursue investment opportunities consistent with its growth strategy and should be able to deliver attractive risk-adjusted returns.

CCI’s income from continuing operations grew 26.4% from the year-ago value to $421 million for the second quarter that ended June 30, 2022. The company’s adjusted EBITDA increased 12.5% year-over-year to $1.07 billion. Also, its adjusted FFO per share came in at $1.80, representing an increase of 5.3% year-over-year.

Analysts expect CCI’s FFO and revenue for the quarter ending September 30, 2022, to increase 10.9% and 7.1% year-over-year to $1.92 and $1.73 billion, respectively. It surpassed consensus FFO estimates in each of the trailing four quarters. Over the past six months, the REIT has gained 2.1% to close the last trading session at $170.17.

CCI’s POWR Ratings reflect solid prospects. According to our proprietary rating system, it has an overall rating of B, translating to a Buy. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has a B grade for Growth, Stability, and Sentiment. It is ranked #9 out of 49 stocks in the REITs - Diversified industry. Click here to see the additional ratings of CCI for Value, Momentum, and Quality.

Lamar Advertising Company (LAMR)

LAMR is one of the largest outdoor advertising companies operating in the United States and Canada. It has the largest network of digital billboards in the United States, with more than 3,900 displays. The company has more than 351,000 displays across the United States and Canada combined.

On May 4, 2022, LAMR acquired Burkhart Advertising Inc., expanding its billboard structures and digital displays portfolio. Through the acquisition, LAMR purchased more than 1,500 billboard structures and 3,200 billboard faces, including 23 digital displays, in 38 counties across northern Indiana.

For the fiscal second quarter that ended June 30, 2022, LAMR’s total revenues increased 16.3% year-over-year to $517.85 million. The company’s operating income grew 11.7% from the year-ago value to $166.50 million, while its net income increased 12.2% year-over-year to $134.20 million.

Its adjusted EBITDA rose 14% from its prior-year value to $ 243.36 million. Also, its EPS came in at $1.32, representing an increase of 11.9% year-over-year.

For the quarter ending September 30, 2022, LAMR’s EPS is expected to increase 29% year-over-year to $1.35. Its revenue for fiscal 2022 is expected to increase 12.3% year-over-year to $2.01 billion. It surpassed consensus EPS estimates in three of the trailing four quarters. Over the past three months, the REIT has lost 4.8% to close the last trading session at $94.05.

LAMR’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.

It has a B grade for Quality. Within the same industry, it is ranked #5. To see the additional ratings of LAMR for Growth, Value, Momentum, Stability, and Sentiment, click here.

CCI shares were trading at $171.37 per share on Wednesday afternoon, up $1.20 (+0.71%). Year-to-date, CCI has declined -16.46%, versus a -15.68% rise in the benchmark S&P 500 index during the same period.

About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.


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