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American Tower (AMT) Rises 9.7% in 3 Months: Will the Trend Last?
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Shares of American Tower Corporation (AMT - Free Report) have gained 9.7% in the past three months compared with the industry’s growth of 2.7%.
The company is poised well to ride the growth curve with wireless carriers increasing capital expenditure due to rising wireless penetration, accelerated 5G network deployment efforts and spectrum auctions. The long-term leases with its tenants assure stable cash flows. Moreover, its continued efforts toward macro-tower investments are encouraging. A decent financial position also supports its growth endeavors.
The REIT raised its outlook for 2024. It expects adjusted funds from operations (AFFO) per share in the range of $10.30-$10.53, which indicates a rise at the midpoint of 5.6%. The prior projected range was $10.21-$10.45. Analysts, too, seem bullish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2024 AFFO per share has been raised 5 cents over the past two months to $10.53.
Image Source: Zacks Investment Research
Let us decipher the factors behind the surge in the stock price and check whether this trend will last or not.
The advancement in mobile technology, such as 4G and 5G networks, and the proliferation of bandwidth-intensive applications have driven growth in mobile data usage globally. Also, the rampant usage of network-intensive applications for video conferencing, cloud services and remote-working scenarios has fueled the rise.
Given this backdrop, American Tower’s extensive and geographically diversified communication real estate portfolio is well-poised to gain from the rise in capital spending by wireless carriers on the incremental demand from global 4G and 5G deployment efforts, growing wireless penetration and spectrum auctions.
American Tower 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 to 10 years) tower leases with major wireless carriers with multiple renewal period options. Management expects to generate nearly $60 billion in non-cancellable customer lease revenues in the future.
Moreover, American Tower has a solid track record of delivering a healthy performance due to the robust demand for its global macro-tower-oriented asset base. It has witnessed strong growth in key financial metrics while continuing platform expansion.
In the first quarter of 2024, the company recorded healthy year-over-year organic tenant billings growth of 5.4% and total tenant billings growth of 6.3%. Also, in the first quarter, revenues from the property segment and adjusted EBITDA increased 3.3% and 5.2% on a year-over-year basis, respectively.
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, healthy performance is expected to continue in 2024.
American Tower’s focus on macro-tower investment opportunities and gaining scale across global markets has paid off well. It has built more than 45,000 international sites since it began expanding internationally. Around 8,000 of these sites have been built in Africa as carriers continue to invest in their network coverage and densification needs.
On the balance sheet front, AMT exited the first quarter of 2024 with $9.3 billion in total liquidity, and its net leverage ratio was 5.0. With a weighted average remaining debt term of 5.8 years, it has decent financial flexibility.
Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and American Tower remains committed to that. In the last five years, American Tower has increased its dividend 17 times, and the annualized dividend growth rate for this period is 12.74%. This is attractive to income investors and represents a steady income stream. Check American Tower’s dividend history here.
However, customer concentration and consolidation in the wireless industry are the major concerns in the near term and are likely to weigh on top-line growth. High interest rates add to its woes.
The Zacks Consensus Estimate for PK’s 2024 FFO per share stands at $2.20, indicating an increase of 7.8% from the year-ago reported figure.
The Zacks Consensus Estimate for STAG’s 2024 FFO per share is pinned at $2.38, suggesting year-over-year growth of 3.9%.
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 (AMT) Rises 9.7% in 3 Months: Will the Trend Last?
Shares of American Tower Corporation (AMT - Free Report) have gained 9.7% in the past three months compared with the industry’s growth of 2.7%.
The company is poised well to ride the growth curve with wireless carriers increasing capital expenditure due to rising wireless penetration, accelerated 5G network deployment efforts and spectrum auctions. The long-term leases with its tenants assure stable cash flows. Moreover, its continued efforts toward macro-tower investments are encouraging. A decent financial position also supports its growth endeavors.
The REIT raised its outlook for 2024. It expects adjusted funds from operations (AFFO) per share in the range of $10.30-$10.53, which indicates a rise at the midpoint of 5.6%. The prior projected range was $10.21-$10.45. Analysts, too, seem bullish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2024 AFFO per share has been raised 5 cents over the past two months to $10.53.
Image Source: Zacks Investment Research
Let us decipher the factors behind the surge in the stock price and check whether this trend will last or not.
The advancement in mobile technology, such as 4G and 5G networks, and the proliferation of bandwidth-intensive applications have driven growth in mobile data usage globally. Also, the rampant usage of network-intensive applications for video conferencing, cloud services and remote-working scenarios has fueled the rise.
Given this backdrop, American Tower’s extensive and geographically diversified communication real estate portfolio is well-poised to gain from the rise in capital spending by wireless carriers on the incremental demand from global 4G and 5G deployment efforts, growing wireless penetration and spectrum auctions.
American Tower 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 to 10 years) tower leases with major wireless carriers with multiple renewal period options. Management expects to generate nearly $60 billion in non-cancellable customer lease revenues in the future.
Moreover, American Tower has a solid track record of delivering a healthy performance due to the robust demand for its global macro-tower-oriented asset base. It has witnessed strong growth in key financial metrics while continuing platform expansion.
In the first quarter of 2024, the company recorded healthy year-over-year organic tenant billings growth of 5.4% and total tenant billings growth of 6.3%. Also, in the first quarter, revenues from the property segment and adjusted EBITDA increased 3.3% and 5.2% on a year-over-year basis, respectively.
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, healthy performance is expected to continue in 2024.
American Tower’s focus on macro-tower investment opportunities and gaining scale across global markets has paid off well. It has built more than 45,000 international sites since it began expanding internationally. Around 8,000 of these sites have been built in Africa as carriers continue to invest in their network coverage and densification needs.
On the balance sheet front, AMT exited the first quarter of 2024 with $9.3 billion in total liquidity, and its net leverage ratio was 5.0. With a weighted average remaining debt term of 5.8 years, it has decent financial flexibility.
Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and American Tower remains committed to that. In the last five years, American Tower has increased its dividend 17 times, and the annualized dividend growth rate for this period is 12.74%. This is attractive to income investors and represents a steady income stream. Check American Tower’s dividend history here.
However, customer concentration and consolidation in the wireless industry are the major concerns in the near term and are likely to weigh on top-line growth. High interest rates add to its woes.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Park Hotels & Resorts (PK - Free Report) and Stag Industrial (STAG - 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 PK’s 2024 FFO per share stands at $2.20, indicating an increase of 7.8% from the year-ago reported figure.
The Zacks Consensus Estimate for STAG’s 2024 FFO per share is pinned at $2.38, suggesting year-over-year growth of 3.9%.
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.