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Why Is American Tower (AMT) Down 4.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for American Tower (AMT - Free Report) . Shares have lost about 4.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is American Tower due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

American Tower Q2 AFFO Tops Estimate, Revenues Miss

American Tower reported second-quarter 2020 adjusted funds from operations (AFFO) per share of $2.07, beating the Zacks Consensus Estimate of $2.05. Further, the reported figure improved 1.5%, year over year.
The company generated total revenues of $1.91 billion, which missed the Zacks Consensus Estimate of $1.95 billion. Nonetheless, the figure improved 1.2% year over year.

The company witnessed strong organic tenant billing growth. However, results were adversely impacted by a decline in revenues in the Asia and Latin America property segment.

Quarter in Detail

Adjusted EBITDA in the reported quarter was $1.21 billion, up 2.4% from the prior-year quarter. Adjusted EBITDA margin was 63.3% in the second quarter of 2020. Operating income was $691.3 million, up 1.1% from the year-ago quarter’s figure.

During the second quarter, the company spent around $128 million to acquire 350 communications sites primarily in international markets.

Cash Flow and Liquidity

In the second quarter of 2020, American Tower generated $989 million of cash from operating activities, declining 4.6% year over year. Free cash flow during the period was $768 million, down 2.7% year over year.

At the end of the second quarter, the company had $6.5 billion of total liquidity. This comprised $2 billion in cash and cash equivalents, and availability of $4.5 billion under its revolving credit facilities (net of any outstanding letters of credit).

Property Segment

Quarterly revenues grossed $1.89 billion, up 2.4% year over year. Operating profit was $1.24 billion and operating profit margin was 66% during second-quarter 2020.

In the Property segment, revenues from the United States totaled $1,088 million, up 8% year over year. However, total international revenues amounted to $806 million, down 4.3% year over year.

Within this, revenues from Asia totaled $271 million, declining 15.5% year over year, while Latin America revenues totaled $294 million, down 15% year over year. Africa revenues grossed $206 million, up 45.7% year over year, while Europe revenues of $35 million improved 3.3% from the year-ago period.

Services Segment

Quarterly revenues totaled $19.8 million, down 51.4% year over year primarily due to a decline in site application, zoning and permitting services. Operating profit was $8 million and operating profit margin was 42% during the June-end quarter.

Outlook

The company reduced the mid-point of its 2020 guidance for property revenues and adjusted EBITDA by $30 million and $40 million, respectively. In fact, for 2020, American Tower anticipates property revenues of $7,655-$7,785 million, reflecting a year-over-year improvement of 3.4% at the mid-point. Adjusted EBITDA is projected at $4,890-$4,970 million, indicating a mid-point increase of 3.9% from the prior year’s reported figure.

Nonetheless, the outlook for consolidated AFFO has been raised by $20 million at midpoint. In fact, consolidated AFFO is estimated to be $3,630-$3,710 million, suggesting a year-over-year mid-point expansion of 4.2%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, American Tower has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, American Tower has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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