American Tower Corp Earnings Cheat Sheet: Margins Shrink as Costs Rise

S&P 500 (NYSE:SPY) component American Tower Corporation (NYSE:AMT) reported a drop to a loss in the third quarter driven by higher costs. American Tower develops, owns, and operates communications sites throughout the country. Among its holdings are wireless communications towers, broadcast communications towers, and distributed antenna system.

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American Tower Earnings Cheat Sheet for the Third Quarter

Results: Reported a loss of $15.7 million (4 cents per diluted share) in the quarter. American Tower Corporation had a net income of $93.4 million or 23 cents per share in the year earlier quarter.

Revenue: Rose 22.8% to $630.4 million from the year earlier quarter.

Actual vs. Wall St. Expectations: AMT fell short of the mean analyst estimate of 25 cents per share. It beat the average revenue estimate of $617.3 million.

Quoting Management: Jim Taiclet, American Tower’s Chief Executive Officer stated, “Our company strives to be world class in two core competencies: operating communications real estate assets to maximize growth and efficiency and evaluating and successfully acquiring, constructing, and integrating these types of assets on a global basis. Our third quarter results again demonstrate our competitive advantage in both of these areas. We delivered over 9% core organic leasing growth on both of our domestic and international assets while adding 15% growth due to the more than 12,000 sites we have added in nine countries on four continents. To further enhance our value to investors, we are preparing for the final steps in our plan to reorganize the company to qualify as a real estate investment trust (REIT) for U.S. federal income tax purposes. Between now and year end, we plan to hold our special meeting of stockholders to approve the reorganization, complete the distribution of our accumulated earnings and profits, continue our communications outreach to REIT investors, and prepare to introduce a quarterly dividend to begin in early 2012.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 22.3%, with the biggest boost coming in the second quarter when revenue rose 27.1% from the year earlier quarter.

Gross margin shrank 2.8 percentage points to 73.2%. The contraction appeared to be driven by increased costs, which rose 37.4% from the year earlier quarter while revenue rose 22.8%.

The company’s loss in the latest quarter follows profits in the previous three quarters. The company reported a profit of $115.2 million in the second quarter, a profit of $91.8 million in the first quarter and $83.5 million in the fourth of the last fiscal year.

The company fell short of estimates last quarter after beating the mark the quarter before with net income of 29 cents versus a mean estimate of net income of 23 cents per share.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the fourth quarter has moved down from 27 cents a share to 26 cents over the last sixty days. For the fiscal year, the average estimate has moved up from 96 cents a share to $1.03 over the last ninety days.

Competitors to Watch: Crown Castle Intl. Corp. (NYSE:CCI), SBA Communications Corp. (NASDAQ:SBAC), Syniverse Holdings, Inc. (NYSE:SVR), AT&T Inc. (NYSE:T), Neustar, Inc (NYSE:NSR), WPCS International Inc. (NASDAQ:WPCS), Telephone & Data Systems, Inc. (NYSE:TDS), Sprint Nextel Corporation (NYSE:S), and Verizon Communications Inc. (NYSE:VZ).

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(Source: Xignite Financials)