American Tower earnings beat as Wall Street maintains bullish stance despite rate headwinds
Shares rise 2.9% following results, but analysts cite elevated refinancing costs and decelerated carrier spending for recent underperformance against the S&P 500.
American Tower Corporation reported second-quarter funds from operations of $2.71 per share, meeting Wall Street expectations, while revenue of $2.8 billion surpassed forecasts of $2.7 billion. The Boston-based real estate investment trust, which owns nearly 149,000 communications sites and a footprint of U.S. data centre facilities, saw its shares close up 2.9% on 28 July following the release of the results.
The company expects full-year funds from operations to fall within the range of $11 to $11.17 per share. For the current fiscal year ending in December, analysts anticipate diluted funds from operations per share to grow marginally to $10.78. American Tower has beaten consensus funds from operations estimates in each of the last four quarters, reinforcing a track record of consistent execution despite broader sector challenges.
Despite the positive earnings report, American Tower stock has underperformed the broader market over the past year, declining 17.8% compared to the S&P 500's 22.4% rally. Year-to-date, the stock is down 1.7%, while the S&P 500 has risen 13.3%. The underperformance is attributed to elevated interest rates increasing refinancing costs and decelerated growth as wireless carriers slowed capital expenditure following initial 5G network rollouts.
Wall Street analysts remain highly optimistic about the stock's prospects. The consensus rating is a "Strong Buy" from 24 covering analysts, a shift that is more bullish than two months prior. The breakdown includes 18 "Strong Buy" ratings, two "Moderate Buys," and four "Holds." The mean price target stands at $213.96, implying a 24% upside from current levels, while the highest target suggests 50.7% potential growth.
RBC Capital analyst Jonathan Atkin maintained a "Buy" rating on 30 July with a price target of $205, implying an 18.8% upside. The Street-high price target of $260 suggests significant room for appreciation. The Pacer Data & Infrastructure Real Estate ETF (SRVR) has outperformed the stock over the past year, gaining marginally, while the ETF is up 11% year-to-date compared to American Tower's single-digit losses.
