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American Tower Stock Gains 28.7% in 6 Months: Will the Trend Last?
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Shares of American Tower (AMT - Free Report) have rallied 28.7% over the past six months, outperforming the industry's 21.7% growth.
In September, AMT concluded the sale of all equity interests in American Tower Company (“ATC”) India to Data Infrastructure Trust (“DIT”) sponsored by an affiliate of Brookfield Asset Management. It is expected that the sale proceeds will be utilized toward the repayment of American Tower's existing indebtedness, including the repayment of the existing term loan in India at the time of closing.
Analysts seem bullish on this tower real estate investment trust (REIT), which currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2024 funds from operations (FFO) per share has been raised marginally northward over the past month to $10.51.
Image Source: Zacks Investment Research
Factors Behind AMT Stock’s Price Surge: Will the Trend Last?
The advancement in mobile technology, such as 4G and 5G, and the proliferation of bandwidth-intensive applications propel growth in mobile data usage globally. Amid this, wireless service providers and carriers have been deploying additional equipment for existing networks to enhance network coverage and capacity. Given its portfolio of more than 224,000 communication sites worldwide and the unmatched geographic diversification of its sites, AMT is strategically positioned to cater to the incremental demand. It focuses on macro-tower investment opportunities and gaining scale in attractive global markets.
AMT has witnessed strong growth in key financial metrics with continued platform expansion. Between 2013 and 2023, American Tower’s revenues from the property segment and adjusted EBITDA witnessed a CAGR of 12.8% and 12.5%, respectively. Amid secular growth trends in the wireless industry, the healthy performance is expected to continue in 2024 and beyond.
AMT has a resilient and stable business model that provides a safe harbor. The company generates most of its revenues from non-cancellable, long-term (typically five-10 years) tower leases with major wireless carriers with multiple renewal period options. Management expects to generate nearly $57 billion of non-cancellable customer lease revenues in the future.
AMT has a robust operating platform and ample liquidity to support its debt servicing. As of June 30, 2024, the company had $9.17 billion in total liquidity and a net leverage ratio of 4.8. In addition, with a weighted average remaining term of debt of 5.8 years, it has decent financial flexibility. As of the end of the second quarter of 2024, it enjoyed the investment-grade credit ratings of BBB- and Baa3 and a stable outlook from Standard & Poor’s and Moody’s, respectively, enabling the company to borrow at a favorable rate.
Solid dividend payouts are arguably the biggest enticements for REIT shareholders and American Tower remains committed to that. In the last five years, AMT increased its dividend 17 times and the annualized dividend growth rate for this period is 12.74%. Moreover, it has a lower dividend payout compared with its industry. Such disbursements highlight its operational strength and commitment to rewarding shareholders handsomely.
Key Risks for AMT
High customer concentration and the ongoing consolidation in the wireless industry are likely to weigh on American Tower’s top-line growth.
Moreover, AMT is rapidly expanding in international markets, especially in the emerging Asian and Latin American markets. Although this geographic diversification will boost revenues, it is likely to affect the bottom line. This is because tower operations in emerging markets are not as profitable as in the mature U.S. market.
The Zacks Consensus Estimate for Crown Castle Inc.’s ongoing year’s FFO per share has increased marginally over the past three months to $6.97.
The Zacks Consensus Estimate for SL Green Realty’s 2024 FFO per share has moved marginally northward in the past week to $7.61.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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American Tower Stock Gains 28.7% in 6 Months: Will the Trend Last?
Shares of American Tower (AMT - Free Report) have rallied 28.7% over the past six months, outperforming the industry's 21.7% growth.
In September, AMT concluded the sale of all equity interests in American Tower Company (“ATC”) India to Data Infrastructure Trust (“DIT”) sponsored by an affiliate of Brookfield Asset Management. It is expected that the sale proceeds will be utilized toward the repayment of American Tower's existing indebtedness, including the repayment of the existing term loan in India at the time of closing.
Analysts seem bullish on this tower real estate investment trust (REIT), which currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2024 funds from operations (FFO) per share has been raised marginally northward over the past month to $10.51.
Image Source: Zacks Investment Research
Factors Behind AMT Stock’s Price Surge: Will the Trend Last?
The advancement in mobile technology, such as 4G and 5G, and the proliferation of bandwidth-intensive applications propel growth in mobile data usage globally. Amid this, wireless service providers and carriers have been deploying additional equipment for existing networks to enhance network coverage and capacity. Given its portfolio of more than 224,000 communication sites worldwide and the unmatched geographic diversification of its sites, AMT is strategically positioned to cater to the incremental demand. It focuses on macro-tower investment opportunities and gaining scale in attractive global markets.
AMT has witnessed strong growth in key financial metrics with continued platform expansion. Between 2013 and 2023, American Tower’s revenues from the property segment and adjusted EBITDA witnessed a CAGR of 12.8% and 12.5%, respectively. Amid secular growth trends in the wireless industry, the healthy performance is expected to continue in 2024 and beyond.
AMT has a resilient and stable business model that provides a safe harbor. The company generates most of its revenues from non-cancellable, long-term (typically five-10 years) tower leases with major wireless carriers with multiple renewal period options. Management expects to generate nearly $57 billion of non-cancellable customer lease revenues in the future.
AMT has a robust operating platform and ample liquidity to support its debt servicing. As of June 30, 2024, the company had $9.17 billion in total liquidity and a net leverage ratio of 4.8. In addition, with a weighted average remaining term of debt of 5.8 years, it has decent financial flexibility. As of the end of the second quarter of 2024, it enjoyed the investment-grade credit ratings of BBB- and Baa3 and a stable outlook from Standard & Poor’s and Moody’s, respectively, enabling the company to borrow at a favorable rate.
Solid dividend payouts are arguably the biggest enticements for REIT shareholders and American Tower remains committed to that. In the last five years, AMT increased its dividend 17 times and the annualized dividend growth rate for this period is 12.74%. Moreover, it has a lower dividend payout compared with its industry. Such disbursements highlight its operational strength and commitment to rewarding shareholders handsomely.
Key Risks for AMT
High customer concentration and the ongoing consolidation in the wireless industry are likely to weigh on American Tower’s top-line growth.
Moreover, AMT is rapidly expanding in international markets, especially in the emerging Asian and Latin American markets. Although this geographic diversification will boost revenues, it is likely to affect the bottom line. This is because tower operations in emerging markets are not as profitable as in the mature U.S. market.
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are Crown Castle Inc. (CCI - Free Report) and SL Green Realty (SLG - Free Report) ,each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Crown Castle Inc.’s ongoing year’s FFO per share has increased marginally over the past three months to $6.97.
The Zacks Consensus Estimate for SL Green Realty’s 2024 FFO per share has moved marginally northward in the past week to $7.61.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.