Surprise, surprise: Another quarter has ended, bringing yet another set of stellar results from America Movil (NYSE: AMX). Last evening, the Latin American cellular giant reported results for both the fourth quarter and the full year. I'll skip the yearly ones for the sake of brevity, but both sets of results showed that the company certainly isn't losing any of its signal strength.
Revenue for the fourth quarter ended Dec. 31 came in at $5.9 billion (for currency translation purposes, $1 = 11.02 pesos), up 20% compared to last year's period, and roughly 3% ahead of Street expectations. It was driven by a 23% increase in service revenue and a 4% gain in equipment sales. During the quarter, America Movil added a net 10.8 million subscribers -- 8.7 million from organic growth and 2.1 million from its acquisition of Verizon's (NYSE: VZ) operations in the Dominican Republic -- bringing its total to 125 million cellular customers. This is a 34% increase over last year's period, and ahead of its stated goal of ending 2006 with a subscriber base of 120 million.
I might just be a Fool, but I think those are some pretty impressive numbers for a company growing off such a large base ... and America Movil's bottom-line results were even more notable.
America Movil reported that net income dropped 28% to $980 million, or $0.56 per ADR, in the quarter ($0.04 ahead of Yahoo! consensus estimates, for those interested). However, realize that the company benefited from an extraordinary tax benefit of roughly $808 million, or $0.46 per share, in the prior-year period. If we back out this one-time gain and do a rough, back-of-the envelope calculation using a constant currency exchange rate, America Movil actually grew net earnings at roughly a 75% clip year over year.
This bottom-line growth was propelled by the general increase in revenue, and more importantly, by an increase in both EBITDA and operating margins. EBITDA margins came in at 37.3% of revenue, up 860 basis points from the fourth quarter of 2005, as America Movil benefited from economies of scale. (The cost of acquiring subscribers is falling relative to the fixed expense of maintaining its network.) This trickle-down effect was also evident in the expansion in operating margin, which increased to an impressive 25.9%, up from 17.3% last year.
Strong revenue growth, continued robust expansion in the subscriber base, and increasing margins -- what more can the eager investor ask for? Oh, I know: An attractive valuation. America Movil certainly delivers on that count, as well. At a recent price of $47.10, shares of America Movil trade at roughly 16 times conservative 2007 estimates, a 48% discount to their projected long-term growth rate.
Simply put, telecom investors with a taste for growth and an ability to tolerate a certain amount of volatility (after all, America Movil remains an emerging market play) might want to call up the company's financials and take another look.
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Fool contributor Will Frankenhoff is enjoying his time writing for The Fool more than reading The Financial Times, rooting for the Jints, or taking a nap. He welcomes your feedback and does not own shares in any of the companies mentioned above. The Fool's disclosure policyhas its own ringtone.
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