American Tower reports $1.29B in revenue, buoying U.S. cell tower market

American Tower Corporation posted a solid quarter, beating estimates and providing more evidence that the cell tower industry is alive and well.

The Boston-based company reported $1.289 billion in revenue, up 19.4 percent year over year and above Zacks' consensus estimate of $1.287 billion. And it posted AFFO (adjusted funds from operations) of $1.41 per share, easily beating Zacks' consensus estimate of $1.25.

"The global proliferation of smartphones is driving significant growth in subscriber demand for higher bandwidth applications," said CEO Jim Taiclet in a press release. "As a result, during the first quarter, we continued to experience solid leasing demand across our served markets as mobile operators invest in their networks to manage key performance factors, including coverage, capacity and peak network speed."

Taiclet also pointed to American Tower's strategy of expanding globally, which was underscored last fall when the company spent $1.2 billion to take a 51 percent stake in Viom, an Indian tower company. The company also bumped up guidance for the year for property revenue, EBITDA and AFFO.

The news follows Crown Castle's announcement last week that it generated $934.4 million in revenue in the second quarter and rang up $395 million in funds from operations, which beat analysts' estimates. Like American Tower, Crown Castle increased guidance for the year.

"Solid Q1 results as financials beat across the board," Jennifer Fritzsche of Wells Fargo Securities wrote in a research note to investors following the release of American Tower's earnings. "We note Q1 core organic growth was higher in Q1 than expected for fiscal year 2016…. Additionally, we look for management thoughts on its new African market, Tanzania, and additional details on that new portfolio."

The back-to-back positive reports in the tower industry are sure to bring relief to some investors who have feared that carriers' evolving strategies focusing on small cells and other non-traditional transmission equipment threatens the tower industry. Shares of both American Tower and Crown Castle slid earlier this year following a Re/code report that Sprint had finalized plans to dramatically overhaul its network, moving its equipment to leased government land.

Sprint has since said that report "wasn't correct."

"While we did not believe the tidal wave of fear that hit the towers was in any way warranted, neither did we think it would recede in such short order, and most clients with whom we spoke at the time were of a similar view," MoffettNathanson analysts wrote in a research note analyzing American Tower's earnings. "We've argued that the passage of time will serve as the catalyst to alleviate investors' fears. A quarter like the one American Tower just reported represents one of many that will be needed to move the stock off its relative lows…. We expect investors with the requisite patience will be rewarded."

For more:
- see American Tower's press release

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