Should You Trust American Tower's Management Team?

More than anything else, managers determine returns. They set strategy, hire key team members, oversee operations, and cash paychecks. Every move they make either enhances or destroys shareholder capital.

It pays to know who these men and women are, how they're paid, whether they, too, are owners, and how they perform versus competitors in certain key metrics. In this regular column, I'll examine all that and more with the goal of enhancing our understanding of some of the top stocks in Fooldom.

Next up: American Tower (NYSE: AMT  ) . Is the executive team of this wireless infrastructure provider doing all it can to earn you outsized returns?

Foolish facts

Metric

American Tower

CAPS stars (out of 5) ****
Total ratings 670
Percent bulls 90.4%
Percent bears 9.6%
Bullish pitches 94 out of 108
Highest-rated peers Linktone, MTN GROUP Ltd., America Movil

Data current as of Feb. 18.

For most Fools, American Tower is an economics play. Third World economic reality says digging up the ground to lay cable or fiber makes no sense. Wireless networks offer the only affordable option for connecting billions in Asia's, Africa's, and South America's emerging economies. Towers are the building blocks for these networks.

Think of them as apartment buildings. Tower operators rent space for antennas owned by carriers. In American Tower's case, the list includes developing-country providers like India's Aircel, Mexico's Telefonica Moviles, and Brazil's Vivo. In the United States, American Tower lists Verizon (NYSE: VZ  ) , AT&T (NYSE: T  ) , Sprint Nextel (NYSE: S  ) , and T-Mobile as customers, a clean sweep of the big four mobile operators. Outsourcing helps these and other carriers preserve capital that would otherwise go to network construction.

"Great industry to be in, with tremendous amount of room for growth. Their profitability is directly tied into cell phone data usage and wireless services providers' needs for cell towers. This demand is going to continue to grow with the popularity of smartphones [and] the rolling out of 4G," wrote Foolish investor bball2693 last month.

It's a fair point. According to Cisco's latest forecast, mobile data traffic will increase 26-fold between now and 2015. That's likely to mean more towers and more antennas per tower, a virtuous upgrade cycle that could lead to outrageous growth for American Tower and its peers.

Management overview

Executive

Years

Cash Compensation

Shares Owned

James Taiclet, Chief Executive Officer 10 $1,831,750 25,023
Tom Bartlett, Chief Financial Officer 2 $964,769 0
Hal Hess, EVP of International Operations 10 $790,041 2,678
Steven Marshall, EVP of U.S. Tower Division 4 $790,000 3,633
Ed DiSanto, Chief Administrative Officer 4 $680,000 14,688

Source: Capital IQ, a division of Standard & Poor's. (Data current as of Feb. 18.)

Capitalizing on that growth will require experience and discipline, two things that American Tower has plenty of on its management team. CEO James Taiclet is a former Air Force officer who's led the company for most of the past decade.

Hal Hess is a finance guy who's also a lawyer with mergers and acquisitions experience, perfect for negotiating international buyouts like November's purchase of up to 1,400 constructed towers and 1,800 under construction and planned ones from South African carrier Cell C.

American Tower has managed mostly double-digit revenue growth over the past decade thanks to moves like this. More recently, an emphasis on efficiency combined with targeted stock buybacks has led to profits growing faster than revenue.

Management analysis versus competitors

Company

Insider Ownership

Gross Margin

ROC*

ROE**

American Tower 0.03% 76.2% 6.0% 10.6%
Crown Castle International (NYSE: CCI  ) 2.30% 69.1% 3.8% (12.3%)
SBA Communications (Nasdaq: SBAC  ) 1.28% 67.9% 1.6% (39.5%)

Source: Capital IQ, a division of Standard & Poor's. (Data current as of Feb. 18.)
* Return on capital.
** Return on equity.

Two things become clear when I look at this table. First, American Tower is the most efficient tower operator in the business. Second, insiders have largely cashed out.

Should you be concerned with insiders' lack of a big ownership stake? I'd see this as an issue if management was abusing stock options but that hasn't been the case. If anything, Taiclet and his team have proven to be excellent stewards of shareholder capital. Don't expect that to change soon.

Now it's your turn to weigh in. Let us know what you think about American Tower's opportunity here and abroad using the comments box below. You can also rate American Tower in Motley Fool CAPS.

Interested in more info on the stocks mentioned in this story? Add American Tower, Crown Castle International or SBA Communications to your watchlist.

American Tower is a Motley Fool Rule Breakers recommendation. America Movil is a Motley Fool Global Gains pick. Motley Fool Alpha owns shares of Cisco.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a bull call spread position in Cisco and is also on Twitter as @TheMotleyFool and its disclosure policy is managing just fine, thanks.


Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 25, 2011, at 10:15 AM, nosfool wrote:

    Everything looks good here as the story makes sense and I agree on their efficiency numbers versus competition.

    Two questions in my mind, 1)inside ownership is very low especially when you compare cash comp to value of shares owned..in the case of CFO=0 and 2) the potential conversion to a REIT and what the short term/long term implications are for investors. Is their potentially any relationship between the two questions and are insiders too hedging a bit?

    In my mind the story is too good not to be in this stock, however I am not ready to build too big of a position.

    Kevin

  • Report this Comment On February 26, 2011, at 12:08 AM, Jocim wrote:

    Does anyone have any information on what options the management have? Also do they have restricted stock.

  • Report this Comment On March 01, 2011, at 10:15 AM, cdawg88 wrote:

    The stock has been getting a lot lot lot of attention lately (Jim Cramer style), mostly due to the narrative of growing data consumption domestically and abroad. With that in mind it is likely there is room for growth but the stock is probably overvalued at the moment TTM PE, Price Book, Price Cash Flow, and Price Sales ratio to name a few are all way above industry averages. Not saying this is a reason not to buy, but be patient for an entry point on this one.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1447441, ~/Articles/ArticleHandler.aspx, 12/18/2014 11:51:48 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement