Communications Sector

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American Tower -- >>> This Cell Phone Tower REIT Is a Strong Buy Now



http://www.thestreet.com/story/13413037/1/this-cell-phone-tower-reit-is-a-strong-buy-now.html?puc=yahoo&cm_ven=YAHOO



By Devesh Kumar Follow

01/05/16


American Tower Corp. (AMT - Get Report) is among certain dividend-paying stocks that should offer a great combination of growth and income in the new year.

Based in Boston, AMT is a real estate investment trust (REIT) that essentially serves as a landlord for wireless companies, by leasing space on its towers for their communications equipment.

Most service operators prefer this model, because they don't need to exhaust cash resources or wait to utilize the towers. American Tower on the other hand strives to put the most number of tenants in each tower.

It's a smart business blueprint that offers a strong play on scale and profitability (12.3% net margin for trailing twelve months). Trading at 33.6 times forward earnings, American Tower is actually available at a steep discount to peers like Crown Castle International Corp. (nearly 45 times) and SBA Communications Corp. (123.7 times).

While Crown Castle and SBA Communications have faster growth metrics, we believe American Tower is a more firmly shaped and reinforced entity with its diversified structure (domestic and global) and large exposure to the industry.

The company is one of the largest global REITs by virtue of being owner, operator and developer of multi-tenant communications properties with a portfolio of over 99,000 communications sites. With the recently announced Viom transaction, its global tower count would be nearly 140,000 towers with almost two tenants per tower.

The company has clearly outperformed the industry by a wide margin, with three-year average revenue growth at 18.8%, trumping the snail-like 1.7% by the industry. On its topline, the company has logged a 27.7%, three-year average upswing vs. the 3.8% managed by its core sector.

Analysts expect the company to maintain the growth momentum. American Tower finished the December-15 fiscal year with an earnings-per-share (EPS) growth of 11.20% backed by a 15.6% revenue upswing. Next year, EPS growth should stay at similar levels (10.10%) and topline rise is expected to clock in 12%.

Over the next five years, American Tower is slated to post an EPS growth of 12.53% every year (which is slightly higher than the sector).

Investment experts offering 12-month price targets for AMT have a median target of $115 -- implying a 19% increase from its last price. Most have a "buy or out-perform" ratings on the stock.

Must Read: PHI, SKM And VIV, 3 Telecommunications Stocks Pushing The Industry Lower

Another metric to help appreciate the impact of American Tower's financial landscape is Adjusted Funds From Operations, or AFFO. This in the third quarter increased by 21.4% to $558 million. American Tower expects its full year 2015 AFFO to come in between $2.115 billion-$2.135 billion, signifying a 17.1% mid-point growth year on year.

With mobile data growth finding its feet, American Tower offers an inside opportunity to be a part of the widespread proliferation that's right around the corner.

And finally, American Tower is also an active M&A player, which allows it to locate and grab fresh, new assets and strengthen its portfolio.

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