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American Tower (AMT) Gains 13.4% in Past 6 Months: Here's Why
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The advancement in mobile technology, such as 4G and 5G networks, and the proliferation of bandwidth-intensive applications have driven the growth in mobile data usage globally. Also, rampant usage of network-intensive applications for video conferencing and cloud services, and remote-working scenarios have fueled the rise.
Given this backdrop, American Tower Corporation’s (AMT - Free Report) extensive and geographically diversified communication real estate portfolio is well-poised to gain from the rise in capital spending by wireless carriers on the incremental demand from global 4G and 5G deployment efforts, growing wireless penetration and spectrum auctions.
Its shares have gained 13.4% in the past six months, outperforming its industry’s growth of 8.6%.
Analysts seem bullish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for the company’s 2023 funds from operations has moved marginally upward over the past month to $9.80.
Image Source: Zacks Investment Research
Let us decipher the factors behind the surge in the stock price.
American Tower has a resilient and stable business model. It generates most of its revenues from non-cancellable, long-term (typically 5-10 years) tower leases with major wireless carriers and has multiple renewal period options. This assures stable revenue generation for the company.
Moreover, the company has a solid track of delivering a healthy performance due to robust demand for its global macro tower-oriented asset base. It has witnessed strong growth in key financial metrics while continuing platform expansion. Between 2012 and 2022, AMT’s revenues from the Property segment and adjusted EBITDA witnessed CAGR of 14.1% and 13.4%, respectively.
This healthy performance is expected to continue in 2023, with management projecting property revenues and adjusted EBITDA to rise 2.9% and 4.1%, respectively, at the midpoint. We expect property revenues and adjusted EBITDA to increase 2.3% and 4.2%, respectively. For 2024, we estimate property revenues and adjusted EBITDA to report an increase of 4.1% and 9.1%, respectively.
American Tower’s focus on macro-tower investment opportunities and expansionary efforts across global markets has paid off well. In 2022, American Tower registered record organic growth complemented by the construction of nearly 7,000 sites, of which 2,300 were built in fourth-quarter 2022. This marked the highest level over the past eight quarters.
Also, AMT’s efforts to strengthen its data center assets through acquisitions bode well.
On the balance sheet front, AMT exited 2022 with total liquidity of $7.1 billion and a net leverage ratio of 5.4. Moreover, its investment-grade credit ratings of BBB- and Baa3 with stable outlook from Standard & Poor’s and Moody’s, respectively, enable the company to borrow at a favorable rate.
In addition, its trailing 12-month return on equity (ROE) is 15.80% compared with the industry’s average of 3.60%, indicating that it is more efficient in using shareholders’ funds than its peers.
Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and American Tower remains committed to that. In December 2022, the company announced a 6.1% sequential hike in the quarterly dividend to $1.56 per share. Moreover, in the last five years, AMT increased its dividend 20 times, and its five-year annualized dividend growth rate is 17.43%. Such efforts boost investors’ confidence in the stock.
Image: Bigstock
American Tower (AMT) Gains 13.4% in Past 6 Months: Here's Why
The advancement in mobile technology, such as 4G and 5G networks, and the proliferation of bandwidth-intensive applications have driven the growth in mobile data usage globally. Also, rampant usage of network-intensive applications for video conferencing and cloud services, and remote-working scenarios have fueled the rise.
Given this backdrop, American Tower Corporation’s (AMT - Free Report) extensive and geographically diversified communication real estate portfolio is well-poised to gain from the rise in capital spending by wireless carriers on the incremental demand from global 4G and 5G deployment efforts, growing wireless penetration and spectrum auctions.
Its shares have gained 13.4% in the past six months, outperforming its industry’s growth of 8.6%.
Analysts seem bullish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for the company’s 2023 funds from operations has moved marginally upward over the past month to $9.80.
Image Source: Zacks Investment Research
Let us decipher the factors behind the surge in the stock price.
American Tower has a resilient and stable business model. It generates most of its revenues from non-cancellable, long-term (typically 5-10 years) tower leases with major wireless carriers and has multiple renewal period options. This assures stable revenue generation for the company.
Moreover, the company has a solid track of delivering a healthy performance due to robust demand for its global macro tower-oriented asset base. It has witnessed strong growth in key financial metrics while continuing platform expansion. Between 2012 and 2022, AMT’s revenues from the Property segment and adjusted EBITDA witnessed CAGR of 14.1% and 13.4%, respectively.
This healthy performance is expected to continue in 2023, with management projecting property revenues and adjusted EBITDA to rise 2.9% and 4.1%, respectively, at the midpoint. We expect property revenues and adjusted EBITDA to increase 2.3% and 4.2%, respectively. For 2024, we estimate property revenues and adjusted EBITDA to report an increase of 4.1% and 9.1%, respectively.
American Tower’s focus on macro-tower investment opportunities and expansionary efforts across global markets has paid off well. In 2022, American Tower registered record organic growth complemented by the construction of nearly 7,000 sites, of which 2,300 were built in fourth-quarter 2022. This marked the highest level over the past eight quarters.
Also, AMT’s efforts to strengthen its data center assets through acquisitions bode well.
On the balance sheet front, AMT exited 2022 with total liquidity of $7.1 billion and a net leverage ratio of 5.4. Moreover, its investment-grade credit ratings of BBB- and Baa3 with stable outlook from Standard & Poor’s and Moody’s, respectively, enable the company to borrow at a favorable rate.
In addition, its trailing 12-month return on equity (ROE) is 15.80% compared with the industry’s average of 3.60%, indicating that it is more efficient in using shareholders’ funds than its peers.
Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and American Tower remains committed to that. In December 2022, the company announced a 6.1% sequential hike in the quarterly dividend to $1.56 per share. Moreover, in the last five years, AMT increased its dividend 20 times, and its five-year annualized dividend growth rate is 17.43%. Such efforts boost investors’ confidence in the stock.
Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties (VICI - Free Report) , Terreno Realty (TRNO - Free Report) and Innovative Industrial Properties (IIPR - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $2.12.
The Zacks Consensus Estimate for Terreno Realty’s 2023 FFO per share is pegged at $2.17.
The Zacks Consensus Estimate for Innovative Industrial Properties’ ongoing year’s FFO per share is pegged at $8.36.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.