Mobile phone usage continues to explode, and that’s good news for American Tower (AMT), the country’s biggest cell phone tower operator. Cell phone penetration in the United States and its territories reached 96 percent of the population in December from just 69 percent five years earlier, according to CTIA, an industry trade group.
With the growth of smartphones, more data flows through all these handsets, which means carriers such as AT&T (T) and Verizon (VZ) need more space on towers provided by companies such as American Tower.
It is the envy of its industry, besting rivals Crown Castle International (CCI) and SBA Communications (SBAC) when it comes to operating profit margins, revenue per tower, and net leverage ratios, according to Morningstar data.
American Tower reported profit of $115.2 million in the second quarter, climbing 15 percent from $99.7 million a year earlier. Revenue jumped 27 percent to $597.2 million. Both of those second quarter figures beat forecasts.
The explosion of broadband services and expansion in emerging markets helped fuel gains. International rental and management revenue soared 85 percent to $288 million. In addition to its U.S. presence, American Tower has sites in Brazil, Chile, Colombia, Ghana, India, Mexico, Peru, and South Africa.
Analysts reacted enthusiastically to the earnings news. “The company continues to expand rapidly internationally, and we believe it will see solid leasing demand domestically in the second half of 2011 and into 2012,” writes Standard & Poor’s analyst James Moorman, who has a five-star buy rating on the stock.
Moorman increased his earnings estimate for 2011 and his 12-month share price target to $72 from $70. That would represent a 34 percent gain for the stock from recent levels.
Citigroup also raised its profit forecast, with analyst Michael Rollins maintaining his buy rating and pointing out that the company may purchase its own shares or pursue acquisitions.
American Tower also is set to become a real estate investment trust (REIT) next year, which means dividends for shareholders. The company next reports on or around Nov. 2.
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