American Tower Corp. (NYSE:AMT) caught the market by a bit of surprise. Not only did the company report its results a day earlier than it said it would, but the company also surprised by reporting lower-than-expected results. To top that off, American Tower also issued guidance that was a little lighter than Wall Street was expecting. However, as we'll see, those surprises had more to do with foreign currencies than with any weakness at American Tower.
A look at the numbers
American Tower reported revenue of $1.046 billion, which was 11.1% higher than in the fourth quarter of 2013. That was in line with expectations and driven largely by a 15.9% surge in international rental and management revenue to $349 million. Meanwhile, U.S. rental and management revenue increased 9.3% to $681 million.
Where the first surprise came was on adjusted funds from operations, or AFFO, which rose 16.8% to $442 million. That figure equated to AFFO per share of $1.10, which was a penny less than analysts were expecting. The company also missed adjusted EBITDA expectations, reported $661 million, while Wall Street wanted $669.9 million. Finally, net income per share came in at $0.42 per share, which was less than the $0.51 Wall Street was looking for. All that being said, these misses were rather minor considering the company did deliver double-digit growth.
Further, one of the reasons its results were a bit below expectations was due to the impact of the fluctuations in foreign currency exchange rates. The company noted that exchange rates affected total rental and management revenue by negative 3.8% while dragging AFFO down by 4.2%. Without this impact, the company's results would have been even stronger.
A look ahead
The other big surprise was the company's guidance for 2015, which came in a bit lighter than analysts were expecting. The company sees its revenue for the full year to be $4.25 billion to $4.33 billion, which is less than the $4.6 billion analysts expect. Meanwhile, the company's guidance for adjusted EBITDA is $2.82 billion to $2.9 billion, which again is a bit shy of estimates of $2.98 billion.
That being said, the company's outlook does exclude the impact from three of the company's tower deals that have yet to close. Those three deals represent just under $1.1 billion in annualized revenue and around a half a billion in gross margin. All three deals are expected to close in the first half of the year and once closed will lead to an increase in the company's guidance. Further, given American Tower's acquisitive past, it's quite likely it will have another acquisition or two close before the end of this year, which could further boost results.
One other thing that could affect the company's results in 2015 are foreign currency exchange rate fluctuations. The company noted that a 5% fluctuation in rates from its current assumption could affect revenue by $72 million, adjusted EBITDA by $39 million, and AFFO by $35 million from the midpoint of its outlook. Currently, the company expects foreign currency exchange rate fluctuations to result in a 4.2% drag on revenue, a 3.4% drag on adjusted EBITDA, and a 4.6% negative impact on AFFO. Suffice it to say that if not for this negative impact, the company's guidance would probably not be as light as it seems. Further, if exchange rates reverse it could act as a nice headwind for the company.
Overall, American Tower's fourth-quarter results were fine. The company did come in a little lighter than expected, but that really had more to do with exchange rates than anything else. The company is still expecting strong growth in 2015, which could be even stronger than expectations because of the timing of the closing of acquisitions, as well as a more favorable impact from foreign exchange rates.