American Tower AMT, a prominent independent owner, operator and developer of multitenant communications real estate, reported its fourth-quarter and full-year 2024 results last week. 

This tower REIT experienced steady growth in its core tower leasing business but faced headwinds from unfavorable foreign exchange impacts and churn. AMT continues to expand its data center investments, committing $600 million to strengthen its digital infrastructure.

Despite the challenges, American Tower remains focused on long-term growth, leveraging its global portfolio and increasing demand for wireless connectivity. Reflecting positive sentiments, AMT shares have been up 9.2% since its closing at $192 on Feb. 24.

Earlier, American Tower shareholders faced a jittery environment due to the significant headwinds it faced in India and Latin America, affecting its growth prospects in these regions. Also, the Fed’s hawkish stance, signaling an extended period of macroeconomic normalization and higher borrowing costs, added to its challenges. 

However, the company’s strategic efforts of exiting business in troubled regions seem encouraging. AMT sold 100% of its ownership interests in its subsidiaries in Australia and New Zealand for a total aggregate consideration of approximately $77.6 million. AMT also entered into an agreement to sell one of its subsidiaries in South Africa, which holds fiber assets, for a total consideration of 2.5 billion South African Rand (roughly $132.7 million), subject to certain adjustments. The company expects to complete the sale in the first quarter of 2025.

Let us now break down the key fundamentals and recent developments to evaluate whether the stock remains an attractive investment.

What Aids American Tower Stock's Growth?

AMT’s fourth-quarter 2024 AFFO per share, attributable to AMT common stockholders, of $2.32 per share missed the Zacks Consensus Estimate by a penny but climbed 1.3% year over year. Fourth-quarter total revenues of $2.55 billion outpaced the Zacks Consensus Estimate of $2.50 billion. The figure also increased 3.7% from the prior-year quarter. 

AMT’s core tower business is experiencing tailwinds. Mobile carriers continued expanding their 5G networks, increasing demand for AMT’s infrastructure. It recorded healthy year-over-year organic tenant billings growth of 5% and total tenant billings growth of 5.7%. 

In addition, Data Centers added $236 million to Property revenues in the fourth quarter, up 9.8% from the prior-year period. Capitalizing on increased demand for cloud computing and artificial intelligence (AI) applications, the company plans to invest more than $600 million in expanding its data center footprint in 2025. Investments in data centers are expected to generate mid-teens stabilized yields.

AMT’s focus on cost containment helped in a year-over-year reduction in cash SG&A in 2024, excluding bad debt, of around $35 million. This supported a cash margin expansion of 140 basis points. Also, its net leverage target of 5X EBITDA is on track, with floating-rate debt reduced to just 3%.

AMT is focusing capital on high-growth markets. Around 80% of its discretionary spend ($1.5 billion) in 2025 will target developed markets (the United States, Canada and Europe), while discretionary spending in emerging markets will be reduced by 60% compared to the 2021 levels and more than 15% compared to the prior year. This shift aims to improve earnings quality and reduce exposure to foreign exchange volatility.

Headwinds to Consider Before Choosing AMT Stock

However, American Tower is not free of challenges. The merger of Sprint with T-Mobile resulted in Sprint churn, negatively impacting AMT’s leasing revenues. This headwind is expected to dissipate after the third quarter of 2025, but in the near term, it will weigh on revenue growth. The final tranche of Sprint churn (140 basis points) will impact the first three quarters of 2025, leading to expected organic tenant billings growth of 5% in 2025.

AMT’s international exposure subjects it to currency volatility, which affected revenue growth in the fourth quarter. The company’s FX-neutral revenue growth was higher than reported figures, highlighting currency-related challenges.

Moreover, the Federal Reserve's high interest rate environment is likely to impact REITs, including AMT. Borrowing costs for financing development and acquisitions are expected to remain high, while fixed-income investments will seem more attractive, reducing the relative appeal of dividend-paying stocks like AMT.

AMT’s Estimate Revisions and Stock Valuation

The estimate revision trends reflect bullish sentiments. The Zacks Consensus Estimate for 2025 adjusted funds from operations (AFFO) per share has increased four cents over the past week, while the same for 2026 has also moved 1.6% north over the same time frame.

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Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

In terms of valuation, American Tower stock is trading at a forward 12-month price-to-FFO of 19.45X, ahead of the REIT industry average of 15.52X and close to its one-year median of 19.41X. AMT stock is also currently trading at a premium compared to its industry peers like SBA Communications Corporation SBAC.

AMT Forward 12 Month Price-to-FFO (P/FFO) Ratio

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Final Thoughts on American Tower Stock

AMT’s long-term growth trajectory remains intact. The company is poised to benefit from the solid demand for its communications assets, with carriers in the U.S. and European markets deploying mid-band spectrum assets and emerging market players densifying 4G networks and rolling out 5G. The increasing demand for AI and cloud computing should boost data centers’ revenues further. Its efforts to exit from India and South African fiber and non-core assets also augur well and are likely to improve earnings quality. 

Moreover, solid dividend payouts are arguably the biggest enticements for REIT shareholders, and AMT plans to resume dividend growth at mid-single-digit rates in 2025 after focusing on deleveraging in prior years. The company also hinted at potential stock buybacks as it reaches its net leverage target of below 5X.

However, near-term headwinds from Sprint churn and FX volatility remain concerns. Also, interest rate headwinds are likely to continue in the current year. While the upward estimate revisions are encouraging, the stock is currently expensive. For existing shareholders, holding on to AMT shares could be a sensible approach, given the company's strong history of dividend growth and strategic focus on high-quality property sectors.
 
American Tower currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Tower currently has an average brokerage recommendation (ABR) of 1.54 on a scale of 1 to 5 (Strong Buy to Strong Sell). Of the 24 brokers covering AMT, 17 rate it a “Strong Buy”, one a “Buy” and six call it a “Hold”. The average price target of $226.19 suggests a 7.91% upside from the current levels.

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Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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