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Why Is American Tower (AMT) Down 17.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for American Tower (AMT - Free Report) . Shares have lost about 17.9% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

American Tower Q4 AFFO Beats, Revenues Miss Estimates

American Tower reported fourth-quarter 2019 adjusted funds from operations (AFFO) per share of $1.95, beating the Zacks Consensus Estimate of $1.90. However, the reported figure declined 1%, year on year.  

The company generated total revenues of $1.92 billion, which narrowly missed the Zacks Consensus Estimate of $1.93 billion. The figure also fell 9.8% year over year.

The company witnessed decent organic tenant billing growth. However, results were adversely impacted by Indian carrier consolidation-driven churn and non-recurrence of the Tata settlement, leading to an overall reduction in Indian contracted tenant revenues.

For full-year 2019, the company reported AFFO per share of $7.73, indicating an increase of 7.4% from the prior year. Total revenues inched up 1.9% year on year to $7.58 billion.

Quarter in Detail

Adjusted EBITDA in the reported quarter was $1,217 million, down 14.6% from the prior-year quarter. Adjusted EBITDA margin was 63.3% in the final quarter of 2019. Operating income was $661.3 million compared with the $388.9 million reported in the year-ago quarter.

During the fourth quarter, the company spent around $2.6 billion, including assumption of existing debt, to acquire 8,218 communications sites. This comprised roughly 5,800 sites in Africa through acquisition of Eaton Towers Holdings Limited, and 2,400 sites in Chile and Peru from Entel PCS Telecomunicaciones S.A. and Entel Peru S.A.

Cash Flow and Liquidity

In the fourth quarter of 2019, American Tower generated $994 million of cash from operating activities, down 21.3% year over year. Free cash flow during this period was $719 million, down 24.5% year over year.

At the end of the December-end quarter, the company had $4.4 billion of total liquidity. This comprised $1.5 billion in cash and cash equivalents, and availability of $2.9 billion under its revolving credit facilities (net of any outstanding letters of credit).

Property Segment

Quarterly revenues grossed $1,908 million, down 9.3% year over year. Operating profit was $1,251 million and operating profit margin was 66% during fourth-quarter 2019.

In the Property segment, revenues from the United States totaled $1,099 million, up 12.6% year over year. However, total international revenues amounted to $809 million, down 28.2% year over year.

Within this, revenues from Asia totaled $295 million, slumping 53.7% year over year. Africa revenues grossed $150 million, up 5.5% year over year, while Europe revenues of $34 million slipped 8.3% from the year-ago period. Latin America revenues totaled $330 million, improving 6.1% year over year.

Services Segment

Quarterly revenues totaled $15 million, down 46.5% year over year. Operating profit was $6 million and operating profit margin was 36% during the October-December period.

Outlook

For 2020, American Tower anticipates property revenues of $7,975-$8,125 million, reflecting an improvement of 7.8% at the mid-point. Adjusted EBITDA is projected at $5,085-$5,185 million, indicating a mid-point increase of 8.2%. Consolidated AFFO is estimated in the $3,740-$3,840 million band, reflecting a mid-point expansion of 7.6%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined 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 F on the value side, putting it in the bottom 20% quintile for this investment strategy.

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

Outlook

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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