Given a portfolio of more than 149,000 communication sites worldwide and the unmatched geographic diversification of its sites, American Tower Corporation AMT is strategically positioned to capture incremental demand from global 5G deployment efforts, growing wireless penetration and spectrum auctions. Its data center segment is poised to gain due to industry-wide strong demand. Moreover, a decent financial position supports its growth endeavors.

However, customer concentration and consolidation are a concern in the wireless industry and are likely to weigh on top-line growth.

What’s Aiding AMT?

American Tower has a solid track record of delivering healthy performance due to the robust demand for its global macro tower-oriented asset base. It has witnessed strong growth in key financial metrics while continuing to expand its platform. In the fourth quarter of 2024, the company recorded healthy year-over-year organic tenant billings growth of 5% and total tenant billings growth of 5.7%. Amid secular growth trends in the wireless industry, the healthy performance is expected to continue in 2025 and beyond.

With the growth in cloud computing, Internet of Things and Big Data, and an increasing number of companies opting for third-party IT infrastructure, data-center companies are experiencing a boom in the market. Also, the estimated growth rates for the Artificial Intelligence (AI), autonomous vehicle and virtual/augmented reality markets will remain robust over the coming years. In the fourth quarter of 2024, the company attained data center revenue growth of 9.7%. The company plans to invest more than $600 million in expanding its data center footprint in 2025.

Apart from having a robust operating platform, American Tower has ample liquidity to support its debt servicing. Its consistent adjusted EBITDA margins, revenue growth and favorable return on invested capital indicate strength in its underlying core business and support its ability to manage its near-term obligations. As of Dec. 31, 2024, AMT had $12 billion in total liquidity. The company's net leverage ratio as of Dec. 31, 2024 was 5.1. With a weighted average remaining term of debt of 5.7 years, it has decent financial flexibility.

American Tower has a disciplined capital distribution strategy and remains committed to increasing shareholder value through regular dividend hikes. In the last five years, American Tower has increased its dividend 16 times, and the annualized dividend growth rate for this period is 10.46%. Moreover, it has a lower dividend payout compared with its industry. Such disbursements highlight its operational strength and commitment to rewarding shareholders handsomely. Check American Tower’s dividend history here.

What’s Hurting AMT?

Customer concentration is high for American Tower, with the company’s top three customers in terms of consolidated operating revenues for 2024 being T-Mobile TMUS (19%), AT&T T (18%) and Verizon Wireless (13%). The loss of TMUS, T or Verizon Wireless as customers, consolidation among them or reduction in network spending may lead to a material impact on the company’s top line.

The merger between T-Mobile and Sprint resulted in tower site overlap for American Tower. This merger has negatively impacted the company’s leasing revenues. In 2024, the churn was roughly 2% of its tenant billings, mainly driven by the churn in its U.S. & Canada property segment. Given the contractual lease cancellations and non-renewals by T-Mobile, including legacy Sprint Corporation leases, management expects the churn rate in its U.S. & Canada property segment will continue to be elevated through 2025.

Despite the Federal Reserve announcing rate cuts in the second half of 2025, the interest rate is still high and is a concern for American Tower. Elevated rates imply a higher borrowing cost for the company, which would affect its ability to purchase or develop real estate. The company has a substantial debt burden, and its total debt, as of Dec. 31, 2024, was approximately $36.50 billion.

In the past three months, shares of this Zacks Rank #3 (Hold) company have gained 20.9% compared with the industry's growth of 6.1%.

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Stocks to Consider

Some better-ranked stocks to consider from the broader REIT sector are Cousins Properties CUZ, carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for CUZ’s 2025 FFO per share has been raised 1.8% over the past month to $2.79.

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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