American Tower Reports a Good Q4 and Offers an Encouraging 2023 Outlook

American Tower’s AMT fourth-quarter results had few surprises, but the 2023 outlook is better than we expected and surpassed those of United States peers. Internationally, many moving parts—notably inflation, market consolidation, and one carrier’s financial difficulties—led to volatility in 2022 results and the 2023 outlook. Long term, we still like American Tower’s international diversification, and current U.S. strength only enhances its standing as our favorite U.S. tower company. We’re raising our fair value estimate to $220 from $210.

For most of 2022, American Tower’s results were weaker than peers’ in North America due to Sprint contracts that expired in the fourth quarter of 2021, resulting in heightened churn and flat organic tenant billings. After now lapping the initial cancellation, American Tower’s fourth-quarter North American organic tenant billings growth moved back up to 4%. We expect lower Sprint churn over the next two years before it is completely cleared by 2025. American Tower’s peers have most of their Sprint churn in front of them, but American Tower is also the only of the three big U.S. tower companies anticipating co-location and amendment growth acceleration in 2023. While we expect collective carrier capital spending in the U.S. to fall in 2023, we attribute American Tower’s ability to buck that headwind to its master lease agreements that lock in and even out spending as well as idiosyncratic differences between companies regarding carrier exposure and tower location. Considering its less urban footprint and lower Sprint churn, believe American Tower’s domestic outperformance can continue over the next few years.

In the international markets, organic tenant billings growth was 5.6% in the fourth quarter, the weakest quarter of the year. While lower escalators, which are tied to inflation in most international markets, were partly to blame, higher churn and lower co-location and amendment spending by carriers were also factors.