American Tower Up to Buy on Emerging Market Buyouts - Analyst Blog

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On July 2, Zacks Investment Research upgraded American Tower Corporation ( AMT ) by a notch to a Zacks Rank #2 (Buy) encouraged by increased deployment of 3G/4G networks and aggressive buyouts of towers in emerging markets. So far this year, the stock has gained nearly 14%.

Why the Upgrade?

Mobile subscriber growth has significantly boosted the wireless tower industry. Moving on, the future financials of the industry are likely to be propelled by strong demand for wireless voice, broadband wireless data and video networks, which require more tower space.


In addition to Brazil and Mexico, American Tower has taken a major initiative to expand its operations in India as well. Moreover, the company has started offering cost-effective outdoor Distributed Antenna Systems (DAS) to its customers.

Recently, in a bid to expand its presence in Brazil, the company decided to purchase Brazilian mobile-phone infrastructure firm BR Towers SA. Post-closure of the deal, American Tower will own nearly 2,530 towers in Brazil and exclusive use rights for almost 2,110 towers in the country.

The company expects that the acquisition of BR Towers SA's towers will generate nearly $131 million (around 292 million Brazilian Reals) in revenues annually. American Tower also estimates annual gross margin of nearly $81 million (roughly 181 million Brazilian Reais) from this operation.

The company also recently announced its plans to bid for Viom Networks - an Indian tower company with nearly 42,000 towers and more than 95,000 tenancies. This buyout will fortify American Tower's foothold in India as it already holds 10,000 towers in this nation.

Furthermore, American Tower's consistent dividend hikes over the last nine quarters stand as a clear indication of the company's financial strength and its potential to perform well in the coming period. In May 2014, the company's board of directors approved a hike of 6.3% in the company's quarterly cash dividend to 34 cents per share.

It is worth noting that American Tower's earnings have exceeded the Zacks Consensus Estimate in two of the last four quarters, with an average earnings surprise of 4.2%. In the previously concluded quarter, the company reported strong financial numbers beating both the top and the bottom-line estimates.

Total revenue of $984.1 million increased 22.6% year over year, also surpassing the Zacks Consensus Estimate of $971 million. On the earnings front, the company reported EPS of 51 cents, beating the Zacks Consensus Estimate of 49 cents.

Notably, over the past 90 days, the company has witnessed positive earnings estimate revisions for the current year, resulting in the Zacks Consensus Estimate moving north by 4.3% to $2.16.

Other Stocks to Consider

Some stocks worth considering in REIT - Diversified industry are Alexandria Real Estate Equities, Inc. ( ARE ), BioMed Realty Trust Inc. ( BMR ) and CatchMark Timber Trust, Inc. ( CTT ). All the three stocks carry the same Zacks Rank as American Tower.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AMT , BMR , ARE , CTT

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