On Mar 13, we maintained our Neutral recommendation on
American Tower Corp.
), as the company's bottom line missed the Zacks Consensus
Estimate but top line beat the same in the recently concluded
Why Kept Neutral?
Higher adoption of smartphones/tablets coupled with increased
deployment of 3G/4G networks by the carriers across the world
will continue to drive the demand for tower space going forward.
American Tower is rapidly expanding its business operations in
various emerging markets.
In addition to Brazil and Mexico, American Tower has taken a
major initiative to expand its operations in India. This will
generate long-run sustainable business for the company.
Moreover, the company has started offering cost-effective
outdoor Distributed Antenna Systems (DAS) to its customers.
Management indicated that DAS has the potential to reach 2.0% of
American Tower's total revenue over a period of three to five
On the downside, American Tower has a substantially leveraged
balance sheet. At the end of the fourth quarter of 2012, the
company had nearly $8.75 billion of net debt (total debt-cash
& cash equivalents) and a debt-to-capitalization ratio was
0.70. Very high level of indebtedness increases the possibility
that the company may not be able to generate sufficient amount of
cash to meet its debt obligations in the future. This may also
hinder the company's effort to access the debt market to borrow
and refinance at favorable rates.
Furthermore, higher customer concentration for American Tower
coupled with huge exposure to foreign exchange rate risks will
act as headwinds for the company going forward.
Currently, American Tower has a Zacks Rank #3 (Hold).
Other Stocks Outlook in Related Industries
Other stocks in the wireless tower industry include
Crown Castle International Corp.
SBA Communication Corp.
). All 3 stocks currently have a Zacks Rank #3 (Hold).
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