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Analyst Blog

On Mar 4, 2014, we issued an updated research report on American Tower Corp. (AMT - Analyst Report). Increased deployment of 3G/4G networks, aggressive buyouts of towers in emerging markets, significant margin improvement and higher dividend growth will continue to act as catalysts for the company.

American Tower failed to deliver positive earnings surprise in three of the last four quarters, with an average beat of 0.61%. The company reported mixed financial results for the fourth quarter of fiscal 2013 with the bottom line missing the Zacks Consensus Estimate but the top line beating.

Higher adoption of smartphones/tablets coupled with increased deployment of 3G/4G networks by the carriers across the world will continue to drive the demand for tower space, going forward. American Tower is rapidly expanding its business operations in various emerging markets.

In addition to Brazil and Mexico, American Tower has taken a major initiative to expand its operations in India. Moreover, the company has started offering cost-effective outdoor Distributed Antenna Systems (DAS) to its customers.

On the downside, American Tower has a substantially leveraged balance sheet. At the end of the second quarter of 2013, the company had nearly $8.79 billion of net debt (total debt-cash & cash equivalents) and the debt-to-capitalization ratio was 0.71. High level of indebtedness increases the possibility of a company failing to generate sufficient amount of cash to meet its debt obligations in the future. This may also hinder the company’s effort to access the debt market to borrow and refinance at favorable rates.

Furthermore, higher customer concentration for American Tower coupled with huge exposure to foreign exchange rate risks will act as headwinds for the company, going forward.

Currently, American Tower has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Other stocks in the wireless tower industry include Crown Castle International Corp. (CCI - Analyst Report), Cousins Properties Inc. (CUZ - Analyst Report) and Douglas Emmett Inc. (DEI - Snapshot Report). All three have a Zacks Rank #2 (Buy).

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