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    AMERICAN TOWER CORP /MA/ (AMT)

    Q2 2024 Earnings Summary

    Reported on Jan 6, 2025 (Before Market Open)
    Pre-Earnings Price$214.93Last close (Jul 29, 2024)
    Post-Earnings Price$220.00Open (Jul 30, 2024)
    Price Change
    $5.07(+2.36%)
    • American Tower is focusing on operational excellence to drive best-in-class margins and optimize organic growth, believing they create more value for their assets than anyone else.
    • They are targeting returns above 20% in emerging markets like Africa, with return on invested capital expected to increase over time through organic growth, margin expansion, and disciplined capital expenditure programs.
    • Strong demand in their CoreSite data center segment, with the second highest quarter of signed new leasing in the company's history, driven by enterprise customers deploying hybrid cloud technology and increasing demand from AI-related workloads.
    • Underperformance in Emerging Markets: AMT's return on invested capital in key emerging markets like Africa and Latin America is currently below their target levels. In Africa, returns are expected to be in the high teens to over 20%, but today we're below that. In Latin America, returns are in the low teens, while the requirements are more in the mid-teens. This suggests potential challenges in achieving desired profitability in these regions.
    • Decommissioning Underperforming Sites: AMT is decommissioning a significant number of underperforming assets to save operational expenses, including about 250 sites in Latin America and 300 in the U.S. This indicates potential issues with asset performance and could impact future revenue growth.
    • Uncertainty in India Asset Sale: There is ongoing uncertainty regarding the approval process for the sale of AMT's India business, with no update on the timing of approvals. Delays in the sale could impact the company's ability to repatriate approximately $2.1 billion in proceeds and affect their financial position.
    1. Dividend Policy and AFFO Growth Outlook
      Q: What's your dividend policy outlook post-2024?
      A: Rodney Smith stated that although the dividend was held flat in 2024 to prioritize balance sheet strength and deleveraging, they expect dividend growth to resume in 2025. Dividend growth is anticipated to align with AFFO per share growth over time, aiming for upper single-digit AFFO per share growth, thus supporting long-term total shareholder returns.

    2. Emerging Markets Exposure and Capital Allocation
      Q: How will emerging markets impact your capital allocation strategy?
      A: Management plans to reduce emerging markets exposure, currently at roughly 25% of AFFO per share pro forma for the India transaction, by focusing discretionary capital on developed markets. They will selectively invest in emerging markets but aim to pivot toward developed markets to reduce exposure over time.

    3. International Strategy and Asset Dispositions
      Q: Will you dispose of non-core emerging market assets?
      A: While always reviewing their portfolio, management currently believes they can create more value by operating these assets rather than selling them, focusing on operational excellence to drive margins and organic growth. However, they remain open to dispositions if they believe others can create more value, as demonstrated with the India sale.

    4. U.S. Leasing Environment and MLAs
      Q: How is the U.S. leasing environment and status of MLAs?
      A: The U.S. leasing environment is proceeding as expected for 2024, with a modest increase in application volumes and carriers continuing 5G upgrades. Over half of their sites are now upgraded with mid-band 5G. One major customer is off their holistic MLA, which may lead to more variability in activity, but they are confident in their ability to monetize either way.

    5. Mid-Band Deployment and International 5G Rollout
      Q: What's the progress on mid-band and 5G deployments domestically and internationally?
      A: In the U.S., over half of sites are upgraded with mid-band 5G, with one carrier over 80% and another over 60%. Internationally, 5G deployment varies; Europe is ahead with high 80s to low 90s% coverage, while Africa and Latin America are further behind, still focusing on 4G with nascent 5G deployments.

    6. Deleveraging Path and Potential Buybacks
      Q: Will you consider share buybacks after deleveraging?
      A: Upon achieving their target leverage below 5x, expected in the second half of the year or early next year, they will consider all capital allocation options, including share buybacks. They will remain disciplined, ensuring any buybacks create more shareholder value than other uses of capital.

    7. Data Center Demand and CoreSite Performance
      Q: What is driving demand for CoreSite data centers?
      A: Demand is broad-based, primarily from enterprises deploying hybrid cloud technologies. They recorded their second-highest bookings quarter, remaining selective in leasing to customers that enhance the ecosystem. Emerging AI demand, particularly in the inferencing layer suitable for their interconnected ecosystem, is also contributing to growth.

    8. India Transaction Status
      Q: What's the status of the India transaction approval?
      A: They are awaiting approval and anticipate closing in the second half of the year. Closing is expected to occur 4 to 6 weeks after approval. No specific update on exact timing is available.

    9. Cost Management and Site Decommissioning
      Q: How is site decommissioning impacting costs?
      A: Decommissioning underperforming assets is contributing to cost savings and margin improvement. They took down about 300 sites in the U.S. and 250 sites in Latin America as part of normal portfolio pruning, enhancing their margin profile through direct cost reductions.

    Research analysts covering AMERICAN TOWER CORP /MA/.