American Tower Tops Q3 2018 Estimates, Raises 2018 Outlook

AMT surpasses estimates

American Tower (AMT) reported better-than-expected third-quarter earnings results on the morning of October 30.

The company reported adjusted funds from operations (or AFFO) of $1.85 per share, handily surpassing analysts’ consensus estimate of $1.81 and registering a YoY (year-over-year) rise of 6.9% mainly driven by mid-single-digit growth in revenue and higher pricing of its products and services.

American Tower Tops Q3 2018 Estimates, Raises 2018 Outlook

The communication tower provider’s revenue for the quarter came in at $1.79 billion, 6.2% higher than the previous year’s $1.68 billion. Its quarterly revenue also came in ahead of analysts’ estimate of $1.76 billion.

American Tower’s global expansion strategies, along with domestic cellular operators’ increased investments in enhancing 4G (fourth-generation) network capacity and speeding up the process of 5G (fifth-generation) network deployment, have helped it report higher top and bottom line results. However, churn driven by carrier consolidation in the Indian market partially offset its performance.

Management commentary

American Tower’s management is bullish about demand for communication sites. On October 30, Jim Taiclet, the company’s CEO, stated, “In the third quarter, our U.S. property segment delivered strong Organic Tenant Billings Growth of 7.4%, reflecting ongoing investments in 4G technology by our tenants to meet ever-increasing data and video demand.”

Taiclet added, “Our International property segment also experienced strong demand for tower space, especially in Latin America. Normalizing for Indian Carrier Consolidation Churn, International Organic Tenant Billings Growth was 8%.”

Revised 2018 outlook

American Tower expects that unfavorable exchange rates and carrier consolidation in the Indian market will have negative impacts on its property revenue, adjusted EBITDA, and consolidated AFFO of ~$230 million, ~$147 million, and ~$123 million, respectively.

Despite this, the company has raised the midpoint of its full-year outlook for property revenue, adjusted EBITDA, and consolidated AFFO by $325 million, $315 million, and $255 million, respectively. American Tower believes strong billings growth across the United States and Latin America will boost its 2018 results.

The company’s revised outlook for property revenue, adjusted EBITDA, and consolidated AFFO are now in the ranges of $7.20 billion–$7.26 billion (earlier projection: $6.84 billion–$6.97 billion), $4.58 billion–$4.62 billion (earlier projection: $4.26 billion–$4.32 billion), and $3.47 billion–$3.50 billion (earlier projection: $3.20 billion–$3.26 billion).

Peer comparison

American Tower’s peers Crown Castle International (CCI) and Simon Property Group (SPG) reported AFFOs of $1.39 per share and $3.05 per share, respectively, in the third quarter. SBA Communications (SBAC) is expected to report AFFO of $1.86 per share in the third quarter.

American Tower makes up ~9.8% of the Real Estate Select Sector SPDR ETF (XLRE).