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Can American Tower Maintain Consistent EBITDA Growth after 2Q17?

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Higher EBITDA in 2Q17

American Tower’s (AMT) 2Q17 EBITDA (earnings before interest, tax, depreciation, and amortization) grew 17.5% to $1.02 billion. These results surpassed the analysts’ expectations of $1 billion and marked the 17th consecutive quarter in which the company reported double-digit EBITDA growth.

The upswing of earnings came from new leasing activities, particularly in emerging countries, backed by strong global demand for AMT’s tower assets.

The strong momentum of AMT’s earnings reflects operating efficiency in translating high organic tenant billing, prudent cost control, and the expansion of assets into operating results.

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American Tower incurs only marginal costs for maintaining its towers. Apart from the land and the towers themselves, the company does not incur any other expenditures, as tenants maintain all other expenditures related to their wireless operations. The addition of new tenants doesn’t cost AMT anything.

Guidance

AMT raised its fiscal 2017 outlook for EBITDA by $45 million, or by 1%. This enhanced guidance reflects high organic billing for the rest of the year, favorable foreign exchange translation, and effective cost-control measures. A favorable foreign exchange is expected to affect its EBITDA by $35 million, with a result of $4.04 billion–$4.10 billion, or 14.7% higher YoY (year-over-year) at the midpoint.

AMT expects its EBITDA margin to be about 61.6%. This margin has registered growth for four quarters in a row.

By comparison, close competitors Realty Income Properties (O), SBA Communications (SBAC), and Crown Castle International (CCI) reported EBITDAs of $265.63 million, $554 million, and $267 million, respectively, for 2Q17. Notably, AMT and its peers constitute ~17% of the ProShares Ultra Real Estate ETF (URE).

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