American Tower Corp. (AMT) today announced its first 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.
Quarterly total revenue was $562.7 million, up 23.8% year over year and surpassed 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, earnings per share (EPS) of 23 cents missed the Zacks Consensus Estimate by a penny.
Adjusted EBITDA in the first quarter of 2011 was $377.1 million, up 21.1% over the prior-year quarter. Adjusted EBITDA margin was 67% compared with 68.5% in the prior-year quarter.
Adjusted EBITDA growth was positively impacted by foreign currency exchange rate fluctuations (1.2%) and straight-line revenues and expense recognition (3.1%). Excluding these items, core growth of adjusted EBITDA was 13.5%.
Gross margin in the reported quarter was $422.3 million, up 21.7% year over year. Selling, general & administrative expense was $66.1 million compared with $53.5 million in the year-ago quarter.
Quarterly operating income was $218.3 million, up 22.1% year over year. In the first quarter of 2011, recurring free cash flow per share was 62 cents, up 12.7% year over year.
During the reported quarter, American Tower repurchased 2.4 million shares of its Class A common stock for a total consideration of approximately $122.7 million.
Cash Flow
At the end of first quarter 2011, American Tower generated around $283.8 million of cash from operations compared with $253.6 million in the prior-year quarter. Free cash flow (cash flow from operation less capital expenditure) in the reported quarter was $185.9 million compared with $198.6 million in the year-ago quarter. Recurring cash flow climbed 10.3% year over year to $248.2 million.
Balance Sheet
At the end of first quarter 2011, the company had $362.8 million in cash & cash equivalents and around $5,387.7 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 2010. At the end of the reported quarter, debt-to-capitalization ratio was 0.60 compared with 0.61 at the end of 2010.
Domestic Rental and Management Segment
Quarterly revenue was $417.6 million, up 12.9% year over year. Gross margin spiked to 80.1% compared with 79.1% in the year-ago quarter.Quarterly operating profit was $316.3 million, up 13.6% year over year.
International Rental and Management Segment
Quarterly revenue was $129 million, up 74.8% year over year. Gross margin for the segment was 68.1% compared with 73.4% in the year-ago quarter. Quarterly operating profit was $70.4 million, up 55.4% year over year.
Network Development Services Segment
Quarterly revenue was $16 million, up 50.9% year over year. Gross margin was 53.8% compared with 43.4% in the year-ago quarter. Quarterly operating profit was $6.9 million, up 130% year over year.
Tower Count
As of March 31, 2011, AmericanTower has 37,184 communications towers, of which 36,482 are for Wireless network, 467 for Broadcasting and the remaining 235 for DAS (Distributed Antenna System). Geographically, the company boasts 20,743 wireless towers, 268 broadcast towers and 230 DAS in the United States; 2,651 wireless towers, 199 broadcast towers and 3 DAS in Mexico. Moreover, the company has 2,349 wireless towers in Brazil, 253 in Chile, 1,124 in Columbia, 475 in Peru and 7,928 in India.
Future Financial Outlook by Management
For 2011, total revenue from the Rental & Management segment is expected to range between $2,300 million – $2,340 million. Income from continuing operations is expected within the range of $330 million – $370 million.
Adjusted EBITDA is anticipated in the $1,530 million – $1,570 million range. Cash flow from operating activities is estimated around $1,060 million – $1,110 million. Capital expenditures is expected in the band of $400 million – $450 million. Depreciation, amortization & accretion is projected in the range of $400 million – $450 million.
Recommendation
American Tower has a huge debt, 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. Recent development of satellite-delivered radio and video services may diminish the demand for tower-based broadcast transmission. Moreover, competition from other players like Crown Castle International Corp. (CCI) and NORTEL NETWORKS will act as negative catalyst for the stock going forward.
We, thus, maintain our long-term Underperform recommendation for American Tower. Currently, American Tower has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
AMER TOWER CORP (AMT): Free Stock Analysis Report
CROWN CASTLE (CCI): Free Stock Analysis Report
Zacks Investment Research
