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Buy American Tower Corporation (AMT) Ahead of Q3 Earnings?

Christopher Vargas

American Tower Corporation AMT is set to report its third quarter results Thursday, October 31 before the opening bell. The REIT has seen its shares climb over 35% YTD, outperforming the broader real estate market. The company is coming off a second quarter where revenue and FFO grew from the year ago quarter, which sent its stock to trade higher in the aftermath.

The low rate environment has boosted the company’s performance and a potential third cut this week would be more good news for the REIT industry. With the development of faster mobile data speed, companies like American Tower may be a solid bet to make.

5G Data Provides Room to Grow

American Tower’s diverse portfolio of towers and structures for telecommunications equipment across 19 countries on four continents makes the company an enticing pick-up as the development and implementation of the 5G network comes to fruition.

The company’s presence in international markets allow it to cash in on regions such as Nigeria and India as they move from 3G to 4G and eventually 5G. According to management, smartphone data usage will grow 31% annually worldwide through at least 2023. Data usage growth nourishes AMT as it has grown its free cash flow by more than 15% annually over the past decade.

The company’s large push into emerging markets in India, Latin America, and Africa allow it to get in on the ground floor of exponential data usage growth over the next several decades. The company’s international expansion paired with the non-cyclical demand for its services helps the company withstand economic downturns.

Outlook

As fears of a global economic slowdown rise, dividend paying companies that can weather broader market volatility will be in demand. Regardless of the trajectory of the economy, consumers will still need their phones to be operational and ping data off their mobile carrier's technology installed on AMT's network of towers. The REIT’s legally mandated dividend with a 1.8% yield can also cushion portfolios if markets go haywire.

Our Q3 consensus estimates project American Tower to see an FFO hike of 5.95% to $1.96 per share on the back of a 4.09% sales climb to $1.86 billion. Geographically, US net sales are projected to reach $1.01 billion for a 5.05% gain while the Asian region declines 9.27% to $293 million. The EMEA and Latin America regions are forecasted to make respective gains of 7.95% and 14.4%.

Looking ahead to the firm’s full fiscal 2019 figures, our estimates call for FFO to slip 1.25% to $7.89 per share and for net sales to miss fiscal 2018’s figure by a light 0.07%. The Latin America region is estimated to lead the pack with a 18.2% gain to $1.38 billion while EMEA grows 14.3% to $715.6 million. US sales are projected to reach $4.02 billion for a year over year climb of 11.6%.

Bottom Line

American Tower is riding the global internet growth wave through the telecommunication towers it leases out to major wireless carriers. The company looks to be a solid growth stock to bet on as its non-cyclical nature paired with the global shift towards faster data speeds should bolster the company’s operations for years to come.

Furthermore, the firm’s investments in expanding its presence in foreign markets positions the company to fill the growing demand for telecommunications equipment. Investors looking to get in on the rapid growth in mobile data usage while collecting legally insured dividends could consider AMT as a potential play to make.

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