Macquarie Analysts Visited American Tower HQ, Come Away Excited

• Shares of American Tower Corp AMT shares have underperformed the tower peers year-to-date and are trading close to their historical trough valuation levels.
• Macquarie’s Kevin Smithen maintained an Outperform rating on the company, with a price target of $114.
• A superior growth profile makes the company’s shares a good 3-5 year investment, Smithen mentioned.

American Tower is expected to provide IRR/ROIC updates on specific international markets and deals at its upcoming Analyst Day. This is expected to alleviate market fears on the company’s EM exposure, analyst Kevin Smithen stated.

The S&P’s revision of American Tower’s outlook from negative to stable should also alleviate any fears related to currency impact on the company’s investment grade rating.

Smithen added, “We view AMT as one of the highest-quality companies in the market trading at near trough valuations and we urge value and growth investors to aggressively buy this blue-chip tower bellwether at current levels.”

The analyst pointed out that international escalators are tied to CPI, which is expected to increase international constant currency revenue growth rates in 2016. Since all of American Tower’s international markets, except India and Nigeria, have CPI-adjusted escalators its “aggregate int’l. escalator could rise by ~100bps, from ~5% to ~6% next year,” the Macquarie report said.

American Tower’s US business excluding new VZ sites is expected to grow by 6.5-7 percent in 2016, but the contribution from the DAS business, which currently represents only 5 percent of the total revenues, is unlikely to change significantly over the next few years.