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    American Tower Corp (AMT)

    Q1 2024 Summary

    Published Jan 10, 2025, 5:10 PM UTC
    Initial Price$214.41January 1, 2024
    Final Price$193.01April 1, 2024
    Price Change$-21.40
    % Change-9.98%

    What went well

    • American Tower is experiencing a significant acceleration in domestic activity, with a 70% increase in its application pipeline in Q1 compared to Q4, indicating strong demand for its tower assets.
    • The company expects at least 5% organic tenant billings growth on average between 2023 and 2027, underpinned by broad-based activity from all major U.S. customers and supportive of its long-term guidance.
    • CoreSite, AMT's data center business, continues to outperform with record levels of new business, leading to higher revenue growth; the backlog of signed deals positions CoreSite well for high levels of growth over the next couple of years.

    What went wrong

    • AMT expects elevated consolidation churn in Latin America over the next few years, limiting growth in that region to low single digits.
    • Uncertainty around economic conditions, interest rates, and the timing of the India transaction may impede AMT's ability to reduce leverage to its target, potentially delaying stock buybacks and affecting financial flexibility.
    • A major U.S. customer has rolled off a comprehensive Master Lease Agreement, moving to "pay by the drink," introducing more seasonality and revenue volatility for AMT.

    Q&A Summary

    1. US Activity Acceleration
      Q: What is driving the acceleration in US activity and its implications?
      A: The company is seeing an acceleration in US activity, with application pipelines in Q1 about 70% higher than in Q4. This uptick is broad-based across all major customers. However, this increased activity does not change their guidance for the year, as they are still expecting organic tenant billings growth of approximately 4.7% in the US.

    2. Long-term Growth Guidance
      Q: How does increased activity affect long-term organic tenant billings growth guidance?
      A: The company maintains its long-term guidance of at least 5% organic tenant billings growth on average from 2023 to 2027, or 6% excluding Sprint churn. The recent acceleration supports this guidance, and they remain confident about the activity levels underpinning their long-term outlook.

    3. M&A and India Sale Timing
      Q: Any updates on M&A activity and the India sale timing?
      A: The company is not seeing any compelling M&A opportunities that would alter their capital allocation priorities. The sale of their India business is expected in the second half of the year, with total proceeds up to $2.5 billion.

    4. Dividend Payout Ratio
      Q: What payout ratio are you aiming for in dividends?
      A: The company aims to maintain a payout ratio of around 60% to 65%, allowing for growth in AFFO per share and providing financial flexibility.

    5. Potential for Stock Buybacks
      Q: When might stock buybacks become an option?
      A: Stock buybacks may be considered after achieving a sustained net leverage of 5x or below, likely towards the end of the year, depending on economic certainty and interest rates.

    6. Carrier CapEx vs. Leasing Activity
      Q: How does carrier CapEx correlate with leasing activity?
      A: Carrier CapEx is not a perfect indicator of tower leasing activity because it funds various areas, including core networks and fiber. While carrier CapEx for 5G is around $35–36 billion per year, up $5–6 billion from 4G, it doesn't directly translate to tower leasing growth.

    7. Latin America Trends
      Q: What are the trends and expected churn in Latin America?
      A: Latin America is expected to have around 2% organic tenant billings growth in 2024, with churn moderating to about 5%, down from close to 6% last year. Churn is impacted by the Oi (OA) acquisition, which will take a couple more years to work through.

    8. Foreign Currency Impact
      Q: How are FX movements affecting your outlook and hedging strategy?
      A: FX headwinds are present, particularly in Africa, leading to a $15 million decrease in property revenue outlook. The company hedges through debt diversification and reinvesting cash flows locally but notes that hedging options are limited in some markets.

    9. Cost-Cutting Measures
      Q: What specific actions are you taking to keep costs down?
      A: The company is focusing on operational excellence, automating processes, and exporting best practices across markets to drive efficiency without impacting customer service.

    10. CoreSite Performance
      Q: What is driving CoreSite's strong MMR per cabinet growth?
      A: Strong pricing is driven by supply-demand dynamics, with constrained supply leading to higher prices across all markets. There's a healthy mix of retail and scale customers, and the company remains selective to maintain industry-leading returns.

    11. Fixed Wireless Access Contribution
      Q: How does fixed wireless access contribute to your growth outlook?
      A: Fixed wireless is growing, with about 10 million subscribers in the US. Current builds are utilizing excess capacity, and while standalone fixed wireless builds could drive additional activity, this is not included in the long-term guidance and would be upside if it occurs.

    12. International Use of MLAs
      Q: To what extent do you use MLAs internationally?
      A: The company uses a variety of contract structures internationally, including some holistic MLAs, but these agreements are not as common outside the US.

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