American Tower Corp. (AMT) reported mixed first quarter 2011 financial results, where revenue exceeded the Zacks Consensus Estimate but earnings per share (EPS) fell short of the Zacks Consensus Estimate. The top-line growth was mainly attributable to the rise in demand for broadband data services coupled with the company’s global expansion strategy.
First Quarter Highlights
Quarterly total revenue was $562.7 million, up 23.8% year over year and handily beat the Zacks Consensus Estimate of $550 million. On a GAAP basis, net income in the first quarter of 2011 was $91.8 million or 23 cents per share compared with a net income of $96.3 million or 24 cents per share in the prior-year quarter. However, EPS of 23 cents missed the Zacks Consensus Estimate by a penny.
Adjusted EBITDA margin was 67% compared with 68.5% in the prior-year quarter. Gross margin in the reported quarter was $422.3 million, up 21.7% year over year. Quarterly operating income was $218.3 million, up 22.1% year over year.
Agreements of Analysts
Of the 15 analysts covering the stock in the last 7 days, none revised their estimates for the second quarter of 2011. Similarly, for the third quarter of 2011, none of the 14 analysts revised their estimates..
For fiscal 2011 and fiscal 2012, out of the 15 analysts, none increased or decreased their estimates during the last 7 days.
Currently, the Zacks Consensus EPS Estimate for the second quarter of 2011 is pegged at 23 cents. The projected annual growth rate is negative 9.6%. Similarly, for the third quarter, the current Zacks Consensus EPS Estimate of 25 cents indicates a gain of 6.52% year over year.
Magnitude of Estimate Revisions
For the second and third quarter of 2011, during the last 7 days, the current Zacks Consensus Estimate remained unchanged at 23 and 25 cents, respectively. Likewise, for fiscal 2011 and 2012, the current Zacks Consensus Estimate remained unchanged at 96 cents and $1.31, respectively, in the last 7 days.
Earning Surprises
With respect to earnings surprises during the last four quarters, the company has produced an average earnings surprise of 1.53% in the trailing four quarters. The ongoing quarter contains a downside potential of (essentially a proxy for future earnings surprises) 4.35% while the next quarter reflects 0.00% upside potentials. Likewise, for fiscal 2011, the downside potential is 1.04% but fiscal 2012 contains an upside potential of 1.53%.
Our Recommendation
American Tower has a highly leveraged balance sheet, which may hinder the company’s effort to access the debt market at favorable rates in order to borrow and refinance its expansion plans. Evolution of new technologies may reduce the demand for site leases.
The recent development of satellite-delivered radio and video services may reduce the need for tower-based broadcast transmission. Moreover, competition from other players like Crown Castle International Corp. (CCI) and NORTEL NETWORKS will act as a headwind for the stock.
We, thus, maintain our long-term Underperform recommendation for American Tower Corp. Currently, American Tower Corp. has a Zacks#3 Rank, implying a short-term Hold rating on the stock.
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