Earning Scorecard: American Tower

American Tower Corp. (AMT) reported solid third quarter 2010 financial results, which outperformed the Zacks Consensus Estimate, driven by healthy growth at the company’s core Rental and Management business segment.

Third Quarter 2010 Highlights

During third quarter 2010, GAAP net income was $93.4 million or 23 cents per share compared with a net income of $67.4 million or 17 cents per share in the prior-year quarter. EPS of 23 cents was well above the Zacks Consensus Estimate of 20 cents.

Higher revenues from the U.S., Latin America and Asia delivered solid results with a strong growth in both adjusted EBITDA and recurring free cash flow.

Total revenue of $513.3 million increased 15.6% year over year and was above the Zacks Consensus Estimate of $489 million. The solid top-line performance was driven by a promising growth at the company’s core Rental and Management business segment.

Agreements of Analysts

Of the 14 analysts covering the stock, in the last 30 days, 8 analysts upwardly revised their estimates for the ensuing fourth quarter, while only 2 of them revised estimates downward. For the following quarter, 5 analysts out of 8, upwardly revised their estimates, while 2 have moved in the opposite direction.

However, 11 analysts out of 13 raised their estimates for fiscal 2010, while none revised their estimates downward. For fiscal 2011, during the same time period, 12 out of 14 analysts revised their estimates upward and only 1 analyst revised the estimate downward.

AmericanTower maintains one of the strongest EBITDA margins in the industry. Adjusted EBITDA in the reported quarter was $350 million, up 15.1% over the prior-year quarter. Adjusted EBITDA margin was 68%. Adjusted EBITDA growth was positively impacted by approximately 0.5% due to foreign currency exchange rate fluctuations and approximately 8.9% due to straight-line revenues and expense recognition.

Magnitude of Estimate Revisions

In synergy with the positive estimate revision trend, the Zacks Consensus Estimate has moved up by 1 cent, in the last 30 days, for the ensuing fourth quarter and also moved up by 2 cents for the following quarter. However, for fiscal 2010, the Zacks Consensus Estimate moved up by 5 cents, in the last 30 days, whereas for fiscal 2011 Zacks Consensus Estimate moved up by 7 cents during the same time period.

Our Recommendation

Our long-term view regarding the tower industry is positive, supported by a spurt of demand for high-end smartphones throughout the world. AmericanTower accounts for most of its revenues from long-term (typically 5-10 year) tower leases with major wireless carriers.

Revenues generated from leasing and management of such networks are impressive and over 95% is recurring in nature. AmericanTower also continues to face stiff competition from Crown Castle International Corp. (CCI). We thus maintain our long-term Neutral recommendation for American Tower.

Currently, it is a short-term Zacks #2 Rank (Buy) stock. AmericanTower is quickly 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. This will generate long-run sustainable business for the company.

After China, India is the second largest growth market for wireless services where the expected subscriber base would be 737 million by 2012. Furthermore, the company is also expanding its base in the Latin American markets of Chile and Peru.

AMER TOWER CORP (AMT): Free Stock Analysis Report

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