American Tower Stock Gains 16.2% YTD: Will the Trend Last?

Shares of American Tower AMT have rallied 16.2% so far in the year, outperforming the REIT and equity trust industry's growth of 5.1%. Delighting its shareholders, this tower REIT recently announced a 4.9% hike in its quarterly dividend on the company’s common stock to $1.70 per share from $1.62 paid out earlier. The raised dividend is scheduled to be paid out on April 28 to shareholders of record as of April 11, 2025.Moreover, in the last week of February, this tower REIT came up with its fourth-quarter and full-year 2024 results, showcasing steady growth in its core tower leasing business despite facing headwinds from unfavorable foreign exchange impacts and churn. AMT continues to expand its data center investments, committing $600 million to strengthen its digital infrastructure. AMT also focuses on capital in high-growth markets. Around 80% of its discretionary spend ($1.5 billion) in 2025 will target developed markets (the United States, Canada and Europe), while discretionary spending in emerging markets will be reduced by 60% compared to the 2021 levels and more than 15% compared to the prior year. This shift aims to improve earnings quality and reduce exposure to foreign exchange volatility.Image Source: Zacks Investment ResearchFactors Behind AMT Stock's Price Surge: Will the Trend Last?AMT reported fourth-quarter 2024 AFFO per share of $2.32, slightly missing the Zacks Consensus Estimate by a cent but reflecting a 1.3% year-over-year increase. Meanwhile, total revenues for the quarter reached $2.55 billion, surpassing the Zacks Consensus Estimate of $2.50 billion and marking a 3.7% rise from the same period last year.AMT’s core tower operations are benefiting from favorable market conditions. As mobile carriers advance their 5G network expansions, demand for AMT’s infrastructure has risen. The company reported solid year-over-year organic tenant billings growth of 5%, with total tenant billings increasing by 5.7%. AMT’s top three customers in terms of consolidated operating revenues for 2024 are T-Mobile TMUS (19%), AT&T T (18%) and Verizon Wireless VZ (13%).Furthermore, Data Centers contributed $236 million to Property revenues in the fourth quarter, reflecting a 9.8% increase year over year. Leveraging growing demand for cloud computing and AI applications, the company intends to invest more than $600 million to expand its data center footprint in 2025. These investments are projected to deliver stabilized yields in the mid-teens. Additionally, the company’s strategic move to exit operations in high-risk regions appears to be a positive step.In addition to its strong operating platform, American Tower maintains strong liquidity to comfortably meet its debt obligations. As of Dec. 31, 2024, the company had $12 billion in total liquidity. It also remains on track to achieve its net leverage target of 5X EBITDA, with floating-rate debt reduced to just 3%. Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and AMT, prior to the recent hike of 4.9% in its quarterly dividend, had hinted about its plan to resume dividend growth at mid-single-digit rates in 2025 after focusing on deleveraging in prior years. In the last five years, AMT 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.Key Risks for AMTNevertheless, American Tower faces certain challenges. The Sprint-T-Mobile merger led to Sprint churn, which has pressured AMT’s leasing revenues. While this headwind is expected to subside after the third quarter of 2025, it will continue to constrain revenue growth in the near term.AMT’s global presence exposes it to currency fluctuations, which impacted revenue growth in the fourth quarter. The company's FX-neutral revenue growth outpaced reported figures, underscoring the challenges posed by exchange rate volatility.Final Thoughts on AMT StockAMT’s long-term growth outlook remains solid despite near-term headwinds from Sprint churn, and FX volatility remains a concern. The company is well-positioned to benefit from strong demand for its communications infrastructure, driven by mid-band spectrum deployments in the United States and Europe, as well as 4G upgrades and 5G expansion in emerging markets. Additionally, increasing demand for AI and cloud computing is expected to fuel revenue growth in its data center segment. Its strategic divestment from India, South African fiber, and other non-core assets should strengthen earnings quality and overall financial performance.The estimate revision trends for this Zacks Rank #3 (Hold) company reflect bullish sentiments. The Zacks Consensus Estimate for 2025 adjusted funds from operations (AFFO) per share has increased two cents over the past month, while the same for 2026 has also moved 1.4% north over the same time frame. Given its solid operating fundamentals and the upward estimate revisions, we expect the positive trend in the stock price to continue. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Image Source: Zacks Investment ResearchNote: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report American Tower Corporation (AMT): Free Stock Analysis Report AT&T Inc. (T): Free Stock Analysis Report Verizon Communications Inc. (VZ): Free Stock Analysis Report T-Mobile US, Inc. (TMUS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks