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On Wednesday, Scotiabank (TSX:BNS) analyst Maher Yaghi increased the price target for American Tower Corporation (NYSE:AMT) to $248 from $234, while maintaining a Sector Outperform rating on the stock. The $103.61 billion market cap company, which according to InvestingPro analysis is currently trading above its Fair Value, has seen its stock surge with a 21.67% year-to-date return. Yaghi’s adjustment comes in response to the company’s robust performance at the start of the year, surpassing both Scotiabank’s and broader market expectations in terms of revenue and Adjusted Funds From Operations (AFFOPS) growth.
American Tower’s service revenue significantly benefited from quicker-than-anticipated activity volumes in the United States. The international leasing demand has also shown consistent strength. CoreSite, a part of American Tower’s portfolio, reported high single-digit revenue growth, bolstered by solid enterprise leasing demand. With a robust gross profit margin of 74.55% and a consistent dividend yield of 3.07%, the company has maintained dividend payments for 15 consecutive years, as highlighted in InvestingPro’s analysis.
The company’s management has successfully reduced its leverage to 5.0x, aligning with the upper end of their target range. This reduction in debt levels is anticipated to create opportunities for American Tower to return capital to its shareholders, potentially through share buybacks or to pursue strategic mergers and acquisitions.
Scotiabank’s positive outlook on American Tower is based on several factors, including its diversified portfolio, robust balance sheet, and defensive business model. The analyst forecasts a mid-single-digit growth in AFFOPS for the fiscal year 2025, with an expected acceleration in 2026. This projected growth is attributed to increased carrier activity and an anticipated improvement in earnings quality as the company shifts its capital allocation from emerging markets to developed ones. Yaghi’s commentary underscores the firm’s confidence in American Tower’s strategic direction and continued performance. InvestingPro data shows the company maintains a GOOD overall financial health score of 2.99, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of this prominent Specialized REITs player.
In other recent news, American Tower Corp reported its Q1 2025 earnings, surpassing revenue forecasts with actual figures of $2.56 billion compared to the expected $2.54 billion. However, the company’s earnings per share (EPS) fell short of projections, coming in at $1.04 against an anticipated $1.6. Despite this EPS miss, American Tower’s stock price reacted positively, highlighting investor confidence in the company’s revenue growth. The firm also experienced an adjusted EBITDA margin expansion of 70 basis points, reaching 68.2%. Analysts from Deutsche Bank (ETR:DBKGn) and Goldman Sachs engaged with American Tower during the earnings call, focusing on the company’s portfolio optimization and cost management strategies. The company has been active in mergers and acquisitions, notably closing the sale of its South African fiber business and purchasing a data center asset in Denver. American Tower’s strategic focus remains on expanding its data center capacity and 5G infrastructure, with plans for significant capital expenditures and dividend distributions.
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