By Jody McCoy
Yesterday morning before markets opened, American Tower released their second quarter earnings. Here’s what the analysts had to say:
Amir Rozwadowski of Barclays: American Tower reported 2Q results that were better than expected on all metrics vs. our model, driven by strong demand in both domestic and international markets. Specifically the company reported 2Q results that were 2% ahead of our forecasts on revenues, 5% ahead on EBITDA, 4% ahead on gross margins and 11% ahead on AFFO. The company also raised its full year outlook for 2015, which incorporates the Airtel Nigeria transaction. In the U.S., we believe that the company continues to benefit from on-going network upgrades as carriers build out their LTE footprint both in terms of capacity and coverage, even if spending is now more back half loaded or slipping into 2016. Management noted that U.S. assets delivered an organic core growth of ~6% (~7% excluding the hit from timing around a decommissioning agreement). Similarly, the company reported international organic core growth of ~12%, which seems even better than AMT’s long-term target of 8-11% (200-300bps higher than target growth rate in the U.S.). We believe expectations of continued favorable demand plus the inclusion of announced tower acquisitions helped drive the company’s full year guidance improvement.
Jonathan Schildkraut of Evercore ISI: AMT reported solid 2Q results, beating our total revs, EBITDA, AFFO, and AFFOps estimates by 0.1%, 0.9%, 4.1%, and 3.2%, respectively. However, site leasing revs of $1.15B (+8.7% Q/Q, +14.8%) were 0.2%/1.2% lower than ours/cons. estimates. Domestic organic core revs growth was 5.8% (~7% excluding the impact of equipment decommissioning revs) and international organic core revs growth was 11.6%. AMT provided updated FY15 guidance, increasing (at the mid-point) site leasing revs, EBITDA, AFFO, and AFFOps (assuming 422.7 million shares) by 2.0%, 1.0%, 2.9%, and 2.2%, respectively. We believe this increase was driven, in large part, by the inclusion of Airtel, which is expected to add $110 million to FY15 site leasing and $30 million to FY15 AFFO. Notably, the updated guidance came in 0.4% below the cons. site leasing revs estimate, 0.3% below the cons. EBITDA estimate, but 0.7% above the cons. AFFO per share estimate. While there are a number of moving parts in today’s release, we see no change in our thesis – and view weakness in shares this morning as a buying opportunity.
Spencer Kurn of New Street Research: Revenue and EBITDA were in-line, but AFFO beat due to lower maintenance capex and M&A impacts from the Bharti deal. Guidance was increased due almost entirely due to the closing of the Bharti transaction. Management left organic growth guidance unchanged, which is disappointing given the increase from CCI this quarter. Following the increase to CCI’s guidance this quarter, we hoped to see a similar increase from AMT; however, we are disappointed that organic growth guidance remained unchanged. CCI attributed the guidance increase to activity at Verizon and T-Mobile; we suspect that AMT may not be benefitting from the same trends at Verizon due to their favorable MLA (Master Lease Agreement) following the Verizon Towers transaction. Additionally, we suspect the weakness in domestic leasing margins was driven by lower margins on the Verizon Towers as well.
Jennifer Fritzsche of Wells Fargo: AMT reported Q2 total revenue, Adjusted EBITDA and AFFO/share [adjusted funds from operations] of $1.17 billion, $762 million and $1.26 vs. our estimates of $1.18 billion, $760.6 million and $1.21. Rental revenue was $1.15 billion, up 14.8% y/y (year-on-year), and vs. our estimates of $1.16 billion and 15.4% y/y, respectively. Total rental revenue organic core growth was 7.3%, with 5.8% (including 1.2% negative impact from revenue recognition timing of equipment decommissioning) from domestic towers and 11.6% from international. Recall, domestic organic core growth was positively impacted in Q1’15 by 1.9% to account for the revenue recognition timing of equipment decommissioning. Of note, international organic core growth was higher than we expected, and up from 9.3% in Q1’15. Total Q2 capex was $152 million, and recurring capex was $23 million vs. our $249 million and $29 million.
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