American Tower posts 'very solid Q2 results,' buoying tower market

cell phone tower
American Tower also raised its outlook slightly for the full year.

Shares of American Tower dipped slightly despite solid second-quarter earnings that largely beat analysts’ expectations.

The venerable tower company posted $1.66 billion in total revenue, marking an increase of more than 15% year over year and edging past Wells Fargo Securities’ forecast of $1.65 billion. Property revenue increased 14.9% to $1.64 billion, slightly more than Wells Fargo’s prediction of $1.63 billion, and service revenues of $24 million beat an estimate of $20 million.

Domestic revenue came in at $897 million, roughly in line with analysts’ forecasts, and international revenue of $741 million significantly beat expectations. Shares of American Tower were down by roughly 1% by mid-day Thursday, however.

“The second quarter of 2017 represented our 17th consecutive quarter of double-digit growth in property revenue, adjusted EBITDA and consolidated AFFO (adjusted funds from operations) per share, driven by strong demand for our tower real estate from Los Angeles to Sào Paolo to Paris,” CEO Jim Taiclet said in a press release. “Organic tenant billings growth in the U.S. of over 6% was complemented by organic tenant billings growth of more than 10% in our international markets, where the pace of advanced handset adoption and mobile data usage growth continues to require the addition of substantial network equipment on our sites.”

American Tower’s quarterly results were seen by analysts as welcome news in a segment that has increasingly come under scrutiny in recent months. The market has been beset by rumors of carrier consolidation, which would likely lead to lessened demand for macrocells, and carriers’ growing pursuit of small cells to densify their networks is seen as a growing threat to traditional towers. Meanwhile, AT&T and other carriers have called on their tower partners to consider new business models, calling current arrangements “unsustainable.”   

“Those concerns haven’t played out, of course (though T-Mobile/Sprint is still out there), and American Tower’s share price performance and operating results show why it’s so hard to bet against this business,” Nick Del Deo of MoffettNathanson wrote in a note to investors following the earnings report. “The company posted very solid Q2 results (no surprise there), and slightly bumped up its full-year outlook. Organic growth expectations for the U.S. in 2017 remain at greater than 6%, and increased to ~10% overseas from ~9-10%, a result of pushing back the timing of M&A-related churn in India.”