American Tower Corp. (AMT) reported mixed third quarter 2011 financial results. Despite witnessing a growth in the top line, the company’s bottom line fell mainly due to unfavorable foreign exchange fluctuation and higher operating expenses.
Third Quarter Highlights
Quarterly total revenue was $630.4 million, up 22.8% year over year and ahead of the Zacks Consensus Estimate of $614 million. However, on a GAAP basis, the company reported a loss of $15.7 million or 4 cents per share as opposed to a net income of $93.4 million or 23 cents per share in the prior-year quarter and the Zacks Consensus Estimate of a profit of 25 cents.
Adjusted EBITDA margin was 64% compared with 68% in the prior-year quarter. Gross margin was 73.2% compared with 76% in the year-ago quarter. Quarterly operating income was $228.3 million, up 7% year over year.
Agreements of Analysts
The last seven days saw a complete dearth of estimate revision. All the 16 analysts covering the stock for the fourth quarter of 2011 or 7 analysts for the first quarter of 2012 stuck to their estimates.
The lack of movement was also noticed for fiscal 2011 and 2012 in the last 7 days. None of the 14 or 16 analysts covering the stock for fiscal 2011 and 2012, respectively, moved up or down.
Currently, the Zacks Consensus earnings estimate for the fourth quarter of 2011 is pegged at 28 cents. The projected annual growth rate is 34.82%. Similarly, for the first quarter of 2012, the current Zacks Consensus earnings estimate of 32 cents indicates a gain of 40.99% year over year.
Magnitude of Estimate Revisions
For the fourth quarter of 2011 and first quarter of 2012, during the last 7 days, the Zacks Consensus Estimate remained unchanged at 28 and 32 cents, respectively. Likewise, for fiscal 2011 and 2012, the Zacks Consensus Estimates remained unchanged at 88 cents and $1.36, 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 5.88% in the trailing four quarters. The ongoing quarter contains an upside potential (essentially a proxy for future earnings surprises) of 3.57% while the next quarter reflects a break-even. However, fiscal 2011 contains a downside risk of 9.09% while fiscal 2012 has an upside potential of 5.88%.
Our Recommendation
We believe the wireless tower industry will continue to outperform primarily on the back of huge demand for mobile data and video services. Moreover, increased usage of smartphones and tablets coupled with huge deployment of 3G/LTE networks will increase the demand for data usage.
However, the recent development of satellite-delivered radio and video services could reduce the need for tower-based broadcast transmission. Moreover, competition from other players like Crown Castle International Corp. (CCI) along with higher operating expenses and a highly leveraged balance sheet will act as headwinds to the stock.
We, thus, maintain our long-term Underperform recommendation for American Tower Corp. Currently,the company has a Zacks#3 Rank, implying a short-term Hold rating.
About Earnings Estimate Scorecard
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