American Tower (NYSE: AMT) started 2019 in fine fashion by delivering mid-single-digit growth in revenue and cash flow compared to the prior-year period. The communications tower REIT benefited from strong demand for tower space, which drove healthy organic leasing growth. However, the company is going up against some notable headwinds in India, which will likely mute full-year results.
American Tower results: The raw numbers
|Metric||Q1 2019||Q1 2018||Year-Over-Year Change|
|Revenue||$1.81 billion||$1.74 billion||4.1%|
|Adjusted funds from operations||$817.8 million||$759.3 million||7.7%|
Data source: American Tower.
What happened with American Tower this quarter?
Strong leasing activities in the U.S. offset weakness in Asia:
- The company's U.S. segment generated $986 million in revenue during the quarter, up 5.9% year over year. American Tower benefited from 8.2% organic tenant billing growth as it continued adding more customers to its existing towers.
- Latin America contributed $333 million in revenue, up 0.5% year over year, driven by healthy organic tenant billings growth of 7.7%.
- Revenue from Asia grew 5.8% to $289 million as acquisitions more than offset a 28.5% decline in organic tenant billings due to a settlement with Tata Group in India.
- Revenue in the company's Europe, the Middle East, and Africa (EMEA) segment increased 1.9% year over year to $178 million thanks to a 6.5% rise in organic tenant billings.
- American Towers spent $91 million to acquire 107 communications sites located primarily in international markets.
- The company also completed the acquisition of additional interests in ATC Telecom Infrastructure, which owns cell towers in India. The company now controls 92% of that entity as a result of two transactions completed this year.
Image source: Getty Images.
What management had to say
CEO Jim Taiclet had this to say about the company's results:
We began 2019 with a solid quarter of results, highlighted by strong global leasing activity, 8.2% Organic Tenant Billings Growth in the U.S., the construction of more than 700 new sites, and a 20% dividend increase. We remain focused on driving operational excellence, prudently deploying capital and leveraging our innovation program to capitalize on exciting future opportunities as wireless networks continue to advance. With our portfolio of more than 170,000 towers, small cell systems, and other communications real estate, we believe we are well positioned to take advantage of the global demand trends in mobile to continue driving attractive growth and returns for years to come.
American Tower's ability to lease more space on its towers helped offset problems in India during the quarter. Cell carriers in the country are in the process of consolidating. Because of that, they'll need less tower space. This headwind reduced revenue by $89 million during the quarter and FFO by $0.11 per share compared to the prior-year period.
American Towers expects its issues in India, as well as foreign exchange headwinds, to weigh on full-year results. The company sees total property revenue ranging between $7.135 billion and $7.285 billion, which would be 1.4% below last year's total at the midpoint. Meanwhile, it sees consolidated AFFO in the range of $3.375 billion and $3.475 billion, implying a 3.2% decline at the midpoint. Longer term, however, the company believes it can grow at healthy rates as it uses its cash flow and strong balance sheet to acquire communications infrastructure assets around the world.
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