American Tower Corp. (AMT) reported mixed fourth quarter 2010 financial results. Revenue exceeded the Zacks Consensus Estimate but earnings per share (EPS) felt short. The top-line growth was mainly attributable to the company’s global expansion strategy.
Fourth Quarter Highlights
Fourth quarter 2010 total revenue was approximately $547.6 million, up 22.2% year over year, surpassing the Zacks Consensus Estimate of $537 million.
On a GAAP basis, fourth-quarter net income was $83.5 million or 21 cents per share, compared with net income of $64.4 million or 16 cents per share in the prior-year quarter. However, quarterly EPS of 21 cents was a penny shy of the Zacks Consensus Estimate at 22 cents.
Adjusted EBITDA in the fourth quarter of 2010 was $365.3 million, up 18.5% over the preceding-year quarter. Adjusted EBITDA margin was 67%, versus 69%. Gross margin was 75.7% in the reported quarter, compared with 76% last year.
Agreements of Analysts
Of the 15 analysts covering the stock, six of them have revised their estimates downward in the last 7 days for the first quarter of fiscal 2011. There were no upward revisions. Likewise, for the second quarter of fiscal 2011, seven analysts out of 14 pulled back on their estimates, while none revised to the upside.
Out of the 16 analysts for fiscal 2011, ten lowered their estimates, while none increased. For fiscal 2012, seven out of the 15 analysts revised their estimates downward, while 1 moved in the opposite direction.
Currently, the Zacks Consensus Estimate for the first quarter of fiscal 2011 is pegged at 23 cents. The projected annual negative growth is 4.17%. Similarly for the second quarter, the Zacks Consensus Estimate of 24 cents indicates a loss of 4% year over year.
Magnitude of Estimate Revisions
In synergy with the upward revision of estimates, the Zacks Consensus Estimate declined by 2 cents to 24 cents during the last 7 days for the first quarter 2011. Likewise, for the second quarter of fiscal 2011, the Zacks Consensus Estimate declined 2 cents from 27 cents to 25 cents for the same period.
For fiscal 2011, the Zacks Consensus Estimate dipped 9 cents in the last 7 days from $1.11 to $1.02. Similarly, for fiscal 2012, the Zacks Consensus Estimate plunged 12 cents from $1.47 to $1.35.
Our 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.
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 negative catalyst for the stock.
We, thus, maintain our long-term Underperform recommendation for American Tower Corp. Currently, American Tower Corp. has a Zacks #5 Rank, implying a short-term Strong Sell rating on the stock.
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