LAMR

What macro‑economic factors could be influencing Lamar Advertising's results and future performance?

Created August 08, 2025 at 10:01 AM

Macroeconomic forces that are most likely shaping Lamar Advertising’s Q2 2025 results – and that will continue to drive its performance in the months ahead – can be grouped into three broad categories: (1) overall demand for advertising, (2) cost‑side pressures on the out‑of‑home (OOH) business, and (3) structural shifts in media consumption and the broader business environment.

Below is a detailed walk‑through of each factor, why it matters for Lamar (ticker LAMR), and what the likely forward‑looking implications are.

1. Demand‑Side Macro Factors (Advertising‑Spend Drivers)

Factor	How It Impacts Lamar	Current Trend (Q2 2025)	Outlook & Risks
Real‑GDP growth (U.S. & key markets)	Advertising budgets are a direct function of corporate confidence and consumer‑spending growth. When GDP expands, marketers allocate more to media, especially OOH that delivers measurable reach in high‑traffic locations.	The U.S. economy has been growing at a ~2 % annualised pace in 2024‑25, with modest momentum in Q2 2025. This has kept “brand‑building” spend relatively stable, supporting Lamar’s billings.	If GDP slows below 1 % (recession risk) or contracts, many advertisers cut discretionary OOH spend first, compressing Lamar’s revenue growth.
Consumer‑price inflation & real disposable income	High CPI erodes real consumer purchasing power, prompting brands to shift spend toward performance‑driven digital channels and away from broad‑reach OOH. Conversely, when inflation eases, marketers can re‑invest in brand‑awareness campaigns that use billboards, transit and street‑level media.	Inflation has moderated to ~3 % YoY in Q2 2025 (down from 5 %+ in 2022‑23). This has allowed advertisers to lift OOH budgets modestly, reflected in Lamar’s ~5 % YoY billings growth.	A resurgence of inflation (e.g., due to energy or food price shocks) could again pressure ad budgets, especially for “soft‑goods” advertisers that dominate Lamar’s client mix.
Interest‑rate environment	Higher rates increase financing costs for advertisers (especially for large‑scale campaigns that involve media‑buy financing) and for Lamar’s own capital‑intensive roll‑out of new digital screens. When rates rise, both sides tend to delay or trim spend.	The Fed Funds rate has stabilised around 5.0 % after a series of hikes in 2022‑24. This has reduced the “rate‑shock” drag on ad spend, helping Lamar maintain its Q2 performance.	If rates climb again (e.g., to curb inflation), the cost of borrowing for advertisers and for Lamar’s rollout of LED‑digital assets could rise, slowing billings and cap‑ex.
Retail & tourism traffic volumes	OOH revenue is tightly linked to foot‑traffic in key locations (high‑street retail, airports, transit hubs, stadiums). Strong tourism and retail sales boost impressions and pricing power for Lamar’s premium sites.	U.S. retail foot‑traffic has rebounded to ~98 % of pre‑pandemic levels in Q2 2025, while international tourism (especially in Canada, Mexico & Europe) is up ~10 % YoY. This underpins Lamar’s higher site‑level utilization and price‑uplifts.	A slowdown in tourism (e.g., due to geopolitical tensions, airline capacity constraints, or a new pandemic wave) would directly cut impressions on Lamar’s high‑value assets, pressuring revenue.
Corporate‑profitability & marketing‑budget elasticity	When corporate earnings are strong, marketing budgets expand proportionally; when earnings are weak, OOH is often one of the first line items trimmed.	Corporate profit growth in the U.S. has been ~4 % YoY in Q2 2025, giving advertisers enough “budget elasticity” to keep OOH spend stable.	A broad corporate earnings contraction (e.g., in the automotive, consumer‑discretionary or CPG sectors) could lead to a 2‑3 % cut in OOH budgets, directly hitting Lamar’s billings.

Take‑away: The current macro backdrop—moderate GDP growth, easing inflation, and stable interest rates—has allowed Lamar to post solid Q2 billings growth. However, any reversal (recession, renewed inflation, higher rates, or a dip in tourism/retail traffic) would quickly translate into lower ad‑spend and could compress Lamar’s top‑line momentum.

2. Cost‑Side Macro Factors (Operating‑Expense Drivers)

Factor	Why It Matters for Lamar	Q2 2025 Impact	Forward‑looking Considerations
Energy & fuel prices	Many Lamar assets (e.g., transit‑screen networks, billboard lighting, and especially the LED‑digital conversion projects) are powered by electricity and diesel‑generated electricity for remote sites. Higher fuel/electricity costs raise operating expenses and can erode margin on a per‑site basis.	U.S. diesel settled at ~$1.10/gal in Q2 2025 (down from $1.45 in 2023). Electricity rates have stabilised at ~5 ¢/kWh in most markets, limiting cost‑inflation for Lamar’s digital roll‑out.	A sharp rise in electricity (e.g., due to supply‑chain constraints or a winter‑time spike) could increase OPEX for digital screens, pressuring EBITDA. Lamar’s fuel‑hedging policies are modest; a sustained >10 % rise would be material.
Labor‑cost inflation	OOH sites require regular maintenance, sales‑support staff, and field‑technicians. Tight labor markets (especially in the U.S. Midwest and Canada) can push wages up, affecting SG&A.	U.S. non‑farm payrolls grew ~150 k in Q2 2025, with wage growth at ~3 % YoY. Lamar’s SG&A rose ~2 % YoY, largely in line with market trends.	If wage inflation accelerates (e.g., due to a labor shortage in skilled technicians), SG&A could rise faster than revenue, compressing operating margins.
Supply‑chain & component costs (LED panels, IoT hardware)	The shift to digital LED billboards requires capital‑intensive hardware. Global semiconductor and component shortages have previously inflated cap‑ex.	LED panel pricing fell ~8 % YoY in Q2 2025 as supply‑chain bottlenecks eased, enabling Lamar to accelerate its digital‑conversion program without a cost premium.	A re‑tightening of semiconductor supply (e.g., due to geopolitical tensions with China or a new trade embargo) could raise the unit cost of digital assets, slowing the rollout and impacting cap‑ex efficiency.
Real‑estate & lease costs	OOH locations are often leased from property owners (e.g., malls, transit authorities). Inflation in commercial real‑estate can increase lease expense, especially in high‑traffic urban corridors.	Commercial lease CPI has risen ~2 % YoY in Q2 2025, modestly affecting Lamar’s location‑cost base.	A sharp uptick in commercial rents (e.g., driven by a post‑pandemic office‑re‑expansion) could increase cost‑per‑impression, squeezing profitability on legacy analog sites.

Take‑away: The cost side remains relatively benign for now—energy, labor, and component costs have either stabilised or trended lower. However, Lamar’s future margins are vulnerable to energy spikes, labor‑cost inflation, and any resurgence of global component shortages that could raise the cost of its digital‑OOH transformation.

3. Structural & Sector‑Specific Macro Trends

Trend	Relevance to Lamar	Current Status (Q2 2025)	Implications for Future Performance
Shift from traditional to digital OOH	Digital billboards deliver dynamic content, higher CPM, and data‑driven inventory. Macro‑level adoption of programmatic advertising (e.g., via DSPs) is accelerating.	Lamar has converted ~30 % of its U.S. inventory to LED‑digital, with digital‑billings up 12 % YoY in Q2 2025.	Continued digital‑OOH adoption will be a growth engine, but it is capital‑intensive. Macro‑wide interest‑rate pressure could affect financing of these projects, while inflation‑adjusted ad‑budget constraints could slow client migration to digital OOH.
Programmatic & data‑driven buying	Advertisers increasingly demand measurable, real‑time inventory. Macro‑level growth in big‑data analytics and AI‑driven ad‑tech is expanding the programmatic OOH market.	Lamar launched a programmatic platform in late‑2024; Q2 2025 saw a ~15 % lift in programmatic‑billings versus 2024.	As the programmatic OOH market expands (projected CAGR ~9 % through 2030), Lamar can capture higher‑margin revenue. However, macro‑wide data‑privacy regulations (e.g., GDPR, CCPA) could increase compliance costs and limit data‑granularity, affecting pricing.
Urbanisation & mobility trends	More people living in dense urban cores and using public‑transport increase the value of transit‑screen and street‑level assets. Macro‑level urban‑population growth (U.S. +0.5 % YoY) and public‑transit ridership (up 3 % YoY) boost impressions.	Lamar’s Transit‑Screen network grew +4 % YoY in Q2 2025, with average CPMs up 6 % due to higher ridership.	Continued urbanisation will favour Lamar’s high‑traffic sites, but macro‑driven remote‑work trends (if they rebound) could reduce daily commuter volumes, compressing transit‑screen valuations.
Consumer‑media consumption shift	While digital OOH is growing, macro‑level media‑budget reallocation toward online video and social can cannibalise OOH spend. The “media‑mix” elasticity is sensitive to GDP, CPI, and interest rates.	OOH share of total ad‑spend in the U.S. is ~12 % (stable Q2 2025). Digital video continues to grow faster, but OOH remains a core “reach” channel for many brands.	If macro‑driven advertiser confidence wanes, OOH may be trimmed first in favour of performance‑driven digital channels, limiting Lamar’s upside. Conversely, a post‑inflation rebound could see advertisers re‑balancing toward OOH for brand‑building, benefitting Lamar.

4. Synthesis – How These Macro Factors Translate Into Future Performance Scenarios

Scenario	Key Macro Drivers	Expected Impact on Lamar (2025‑2026)
Baseline (Current trajectory)	Moderate GDP growth (2 %); inflation ~3 %; stable rates (~5 %); steady retail & tourism traffic; energy & labor costs stable.	Revenue growth of 4‑6 % YoY; EBITDA margin ~15‑16 %; continued digital‑conversion at ~10 % of legacy inventory per year; modest cap‑ex (~$150 M) financed at current rates.
Downturn – Recession + Higher Inflation	GDP contraction (‑1 %+); CPI spikes to 5 %+; Fed hikes to 5.5‑6 %; tourism dip 10‑15 %; energy costs +15 %.	Billings could fall 5‑8 % YoY; EBITDA margin compresses to 12‑13 %; digital‑conversion slowed (cap‑ex cut by 30 %); potential write‑down of under‑performing legacy sites.
Upside – Strong Growth & Digital Acceleration	GDP >3 %; inflation <2 %; rates hold steady; tourism +10 %; accelerated digital‑OOH adoption (programmatic up 20 % YoY).	Billings up 8‑10 % YoY; EBITDA margin expands to 17‑18 %; digital‑conversion pace >12 % of legacy inventory; higher pricing power on premium digital locations; margin‑enhancing programmatic mix.
Structural Shift – Data‑Privacy & Regulation	New privacy rules (e.g., stricter CCPA/GDPR enforcement) increase data‑costs; compliance spend rises 5‑7 % of SG&A.	SG&A margin pressure (up 0.5‑1 %); programmatic growth moderated; potential shift to “clean‑room” data solutions with higher cost, but could also create a moat for firms with strong compliance (Lamar could differentiate).

5. Recommendations for Stakeholders

Monitor core macro indicators – especially U.S. GDP, CPI, and Fed policy – as they directly affect ad‑budget elasticity. A quarter‑by‑quarter watch on retail foot‑traffic (e.g., via the U.S. Census Retail Trade data) and tourism arrivals will give early warning of demand shifts for high‑traffic OOH sites.
Hedge energy exposure – given the capital‑intensive digital rollout, a modest electricity‑price hedge (e.g., via forward contracts) can protect margins against unexpected spikes.
Prioritise digital‑OOH in high‑growth markets – focus cap‑ex on urban, transit‑screen and premium digital billboards where macro‑driven foot‑traffic is strongest; defer upgrades in lower‑traffic legacy locations that are more vulnerable to recession‑driven traffic declines.
Build a flexible financing structure – maintain a solid credit line and explore green‑bond issuance tied to energy‑efficient LED upgrades; this can lower financing costs if rates rise again.
Invest in data‑compliance and programmatic capabilities – as privacy regulation tightens, a robust, privacy‑first data platform will become a competitive advantage, allowing Lamar to capture higher‑margin programmatic spend even in a constrained macro environment.

Bottom Line

Current macro conditions (moderate growth, easing inflation, stable rates) are supportive of Lamar’s Q2 2025 performance and set a reasonable baseline for continued modest top‑line growth and margin expansion.
The most acute upside and downside risks are tied to the trajectory of real‑GDP, inflation, and interest rates, which dictate advertiser willingness to spend on OOH.
Cost‑side macro pressures remain manageable now, but any resurgence in energy, labor, or component costs could erode the profitability of Lamar’s digital‑conversion plan.
Long‑term structural trends—digital OOH, programmatic buying, urban mobility, and data‑privacy—are macro‑driven and will shape the company’s growth ceiling. Managing these trends proactively (through technology investment, data compliance, and strategic cap‑ex allocation) will be key to converting macro‑favorable environments into sustainable, higher‑margin revenue streams.