American Tower Corp. (AMT) today announced its second-quarter 2011 financial results. The company’s top line witnessed significant upside primarily attributed to the rise in demand for broadband data services coupled with the company’s global expansion strategy. Management also raised its fiscal 2011 financial outlook.
Quarterly total revenue was $597.2 million, up 27.1% year over year, surpassing the Zacks Consensus Estimate of $580 million. On a GAAP basis, net income in the second quarter of 2011 was $115.2 million or 29 cents per share compared with a net income of $99.7 million or 25 cents per share in the prior-year quarter. Quarterly EPS of 29 cents was significantly above the Zacks Consensus Estimate of 23 cents.
Margins
Adjusted EBITDA in the second quarter of 2011 was $389.1 million, up 21.2% over the prior-year quarter. Adjusted EBITDA margin was 65% compared with 68% in the prior-year quarter.
Adjusted EBITDA growth was positively impacted by foreign currency exchange rate fluctuations (1.8%) and straight-line revenues and expense recognition (2.2%). Excluding these items, core growth of adjusted EBITDA was 17.2%.
Gross margin in the reported quarter was 74.7% compared with 76.1% in the year-ago quarter. Selling, general & administrative expense was $72.3 million compared with $53.6 million in the year-ago quarter. Quarterly operating income was $225.8 million, up 19.6% year over year. In the second quarter of 2011, recurring free cash flow per share was 61 cents, up 5.2% year over year.
Share Repurchase
During the reported quarter, American Tower repurchased 2 million shares of its Class A common stock for a total consideration of approximately $102 million.
Cash Flow
During the first half of 2011, American Tower generated around $559.3 million of cash from operations compared with $516.4 million in the prior-year period. Free cash flow (cash flow from operation less capital expenditure) in the reported period was $322.8 million compared with $383.9 million in the year-ago period. In the second-quarter 2011, recurring free cash flow inched up 3.5% year over year to $244.7 million.
Balance Sheet
At the end of the second quarter of 2011, the company had $333.9 million in cash & cash equivalents and around $5,701.8 million in outstanding debt on its balance sheet compared with $883.9 million in cash & cash equivalents and $5,512.5 million in outstanding debt at the end of fiscal 2010. At the end of the reported quarter, debt-to-capitalization ratio was 0.61 compared with 0.61 at the end of fiscal 2010.
Domestic Rental and Management Segment
Quarterly revenue was $424.9 million, up 13.4% year over year. Gross margin spiked 79.4% compared with 78.5% in the year-ago quarter.Quarterly operating profit was $319.5 million, up 13.8% year over year.
International Rental and Management Segment
Quarterly revenue was $158.9 million, up 94.2% year over year. Gross margin for the segment was 66.6% compared with 73.7% in the year-ago quarter.Quarterly operating profit was $84.3 million, up 67.6% year over year.
Network Development Services Segment
Quarterly revenue was $13.4 million, down 0.5% year over year. Gross margin was 49.6% compared with 52.2% in the year-ago quarter.Quarterly operating profit was $5.1 million, down 7.9% year over year.
Tower Count
On June 30, 2011, AmericanTowercontrols 38,048 communications towers, of which 37,318 are for Wireless network, 467 for Broadcasting and the remaining 263 for DAS (Distributed Antenna System). Geographically, the company boasts 20,850 wireless towers, 268 broadcast towers and 240 DAS in the United States and 16,468 wireless towers, 199 broadcast towers and 23 DAS Outside the U.S.
Future Financial Outlook by Management
For 2011, total revenue from the Rental & Management segment is expected to range between $2,330 million – $2,370 million. Income from continuing operations is expected within the range of $370 million – $410 million.
Adjusted EBITDA is anticipated in the $1,550 million – $1,590 million range. Cash flow from operating activities is estimated around $1,090 million – $1,140 million. Capital expenditures is expected in the band of $400 million – $450 million.
Recommendation
We believe the wireless tower industry will continue to perform extremely well supported by huge demand for mobile data and video services. Last week, Crown Castle International Corp. (CCI), the closest rival of American Tower, reported impressive results.
We maintain our long-term Neutral recommendation on American Tower. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock.
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