American Posts Best Growth of the “Big Three” in Full Year Earnings

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American Tower Corporation (NYSE: AMT) yesterday reported financial results for the quarter and full year ended December 31, 2018 and, along with the expected ‘good marks’ from the company itself, market analysts seemed to agree.

Jim Taiclet, American Tower’s Chief Executive Officer said, “We were pleased to conclude the first year of our Stand and Deliver strategy with a strong quarter, particularly in the U.S. where Organic Tenant Billings Growth reached 8.0% for the first time since 2014,” he said. “We continued to deploy capital using our proven methodology throughout 2018, adding over 24,000 sites to our portfolio, increasing our dividend by 20% and repurchasing more than $230 million in stock, all while growing our Consolidated AFFO per Share by double digits for the 11th consecutive year.”

Taiclet said their outlook for 2019 implies another year of record new business contributions in the U.S. and strong underlying performance internationally, supported by continued global secular growth in mobile data usage. 

Analyst Nick Del Deo of MoffettNathanson said 2018 was, “simply a great year for American Tower’s domestic tower leasing business.” Citing that the company’s initial 2018 guidance called for domestic organic tenant billings growth of better than 6 percent, AMT raised that expectation over the course of the year and ended up posting full year growth of 7.3%, the best among the “Big Three.”  

“To be clear, that’s net growth,” Del Deo said. “Moreover, organic growth in Q4 was 8.0 percent, meaning the company exited 2018 with the wind at its back. On the bottom line, domestic operating profit margin expanded 40 basis points for the year. All in the boring, mature U.S. market.”

Results were more varied among American Tower’s overseas units, according to Del Deo, with growth in Latin America strong (but decelerating) due to Brazil and Mexico. In contrast, carrier consolidation in India delivered what he considered a gut punch to that unit. “While the mess in India is hardly news, it’s still hard to process -13% full year growth for a tower business,” he said.

Jennifer Fritzsche, Managing Director, Equity Research for Wells Fargo Securities, said AMT’s reported Q4 total revenue, Adjusted EBITDA and AFFO/share of $2.13B, $1.42B, and $2.40, beat their estimates of $2.06B, $1.34B, and $2.30 (Street: $2.04B, $1.34B, $2.26).

“We note that AMT’s Tata settlement contributed $334MM to property revenue,” she said.  “Total property revenue was $2.10B, ahead of our $2.03B estimate, and services revenue was $29MM vs. our $30MM est. Domestic organic growth was 8.0% y/y, up from 7.4% sequentially and 5.9% y/y (and vs. our 7.4% estimate).”

The bottom line, according to Fritzsche, is that AMT’s Q4’18 results were “solid, driven by higher than expected domestic leasing activity and the Tata settlement contribution.”

Spencer Kurn with new street research said results beat expectations, driven by higher pass-through revenue and a greater one-time cash settlement from Tata.  Organic growth was actually below Consensus, according to Kurn, as higher churn in India offset a strong beat in the US.

“AFFO per share guidance is now 2 percent below Consensus,” Kurn said, “although this is somewhat disappointing, AMT has a history of guiding conservatively at this point in the year, so we don’t expect consensus estimates to move significantly lower. We remain Neutral on AMT because we continue to see downside to Consensus expectations in India.”  

February 28, 2019 

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