UPDATE 3-Lamar's digital billboard drive starts paying off

* Sees Q4 rev $284 mln vs est $282.4 mln

* Q3 EPS $0.04 vs est $0.07

* Q3 rev $296 mln vs est $292.3 mln

* Q3 spending on digital billboard up three times

Nov 3 (Reuters) - Billboard operator Lamar Advertising Co's strong quarterly sales and outlook suggest that a year-long spending spree on lucrative digital billboards is starting to pay off.

Shares of the company, which has lagged its rivals in digital expansion, rose as much as 21 percent to $25.49. If the gains stick till close, it will be the stock's highest single-day percentage jump in two years.

Traditional billboards, which contribute more than 80 percent of Lamar's sales, have been slowly losing their charm to glitzy LED-lit displays that offer advertisers more customized ad delivery options.

This has forced Lamar and its rivals CBS Outdoor -- a unit of CBS Corp -- and Clear Channel Outdoor Holdings Inc to spend aggressively on digital offerings.

"Though the company missed third-quarter profit estimates, the acceleration in digital expansion and the revenue beat seem to be making investors happy," Evercore Partners analyst Douglas Arthur told Reuters.

Lamar forecast fourth-quarter revenue of $284 million, topping analysts' estimates for the first time in at least three quarters. Analysts' were expecting $282.4 million, according to Thomson Reuters I/B/E/S.

Lamar, which also operates logo signs and transit advertising displays, said revenue for the third quarter was $296.7 million. Analysts had forecast $292.3 million.

Arthur said the revenue beat could also indicate a turnaround in local advertising markets, where Lamar has a strong presence.

"Revenue figures are not getting worse any more and some people are trying to make the case that because Lamar is primarily into local advertising, as opposed to national advertising, that it is a sign of the local advertising market bottoming and starting to turn."

Lamar, which gets 80 percent of its revenue from the United States, said third-quarter spending on digital billboards tripled to about $12 billion and accounted for more than a third of the company's capital expenditure for the quarter.

Earlier this week, rival Clear Channel posted a lower-than-expected quarterly profit as international revenue fell on weakness in Europe and higher expenses on site leases for digital advertisement displays.

Lamar's third-quarter net income rose to $4 million, or 4 cents per share, from $690,000, or 1 cent per share, a year ago. Analysts, on average, had expected third-quarter earnings of 7 cents per share.