On Aug 29, we maintained our Neutral recommendation on
American Tower Corp.
). The company reported tepid second-quarter 2013 results with
both the top and the bottom lines missing the Zacks Consensus
AMER TOWER CORP (AMT): Free Stock Analysis
CROWN CASTLE (CCI): Free Stock Analysis
DOUGLAS EMMETT (DEI): Free Stock Analysis
SBA COMM CORP (SBAC): Free Stock Analysis
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Why Reiterated at 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. The company is already on the verge of
acquiring 8,000 wireless towers of Tower Vision, a privately held
Indian wireless tower operator. This will generate long-run
sustainable business for the company. Moreover, the company also
planned to acquire 2,790 Brazilian towers and 1,666 Mexican
towers from NII Holdings for $413 million and $398 million,
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 second quarter of 2013, the
company had nearly $8.79 billion of net debt (total debt-cash
& cash equivalents) and the debt-to-capitalization ratio was
0.71. High level of indebtedness increases the possibility of a
company failing 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 to Consider
Other stocks in the wireless tower industry include
Crown Castle International Corp.
SBA Communication Corp.
Douglas Emmett Inc.
). Currently, both Crown Castle and SBA Communication have a
Zacks Rank #3 (Hold) while Douglas Emmett has a Zacks Rank #2