All this makes SBA Communications Corporation (NASDAQ:SBAC) a great proposition for a growth investor.
Crown Castle remains top dog
Crown Castle International Corp. (NYSE:CCI), based in Houston, remains the biggest player in the U.S. tower market, with about 29,400 towers. The company focuses not just on having towers, but linking those towers with fiber infrastructure, providing an additional revenue stream. In addition to its U.S. towers, it owns 77.6% of an Australian tower company.
Financially, Crown Castle International Corp. (NYSE:CCI) is managed more conservatively than SBA Communications Corporation (NASDAQ:SBAC), meaning it actually makes some money. For the June quarter, that was $52.3 million in earnings on $735 million in revenues, about 26% higher on the top line than in the same quarter a year earlier, but half the previous June’s bottom line because of tax issues.
As with SBA Communications Corporation (NASDAQ:SBAC), the balance sheet at Crown Castle International Corp. (NYSE:CCI) shows substantial debt, amounting to about 75% of the equity. But the company is consistently cash flow positive, raking in almost $773 million in cash from operations last year alone. Crown Castle has more than twice the market cap of SBA, almost $21 billion by last count, and does not yet pay a dividend.
Crown Castle International Corp. (NYSE:CCI) is a more volatile stock than SBA Communications Corporation (NASDAQ:SBAC), meaning you want to time your purchase to somewhere closer to the lows in the chart pattern. That’s where it is now, having been as high as $80 per share earlier this year, up 9% for the last year. The biggest risks here are credit risks, but Moody’s says the company’s credit is still solid despite a recent $500 million increase in borrowing.
Crown Castle International Corp. (NYSE:CCI) offers less growth than SBA Communications Corporation (NASDAQ:SBAC), but more stability, and if you prefer growth in developed markets to developing ones, there is less political risk in Australia than Central America.
AMT is the safe choice
If you’re looking for real earnings and dividends, however, American Tower Corp (NYSE:AMT), based in Boston, should be your choice.
The stock had been going nowhere until the Global Tower deal, but rose almost 20% on the heels of the announcement. As Amir Lalani of Insider Monkey noted last month , hedge funds are loading up on this stock, with 46 of them in long positions.
American Tower Corp (NYSE:AMT) is run as a Real Estate Investment Trust, or REIT. The company was even stronger internationally than it is in the U.S., before the Global transaction, with almost 24,000 towers outside the U.S. In addition to owning its towers, AMT also offers “tower services,” meaning its own people can install gear for you. In addition to outdoor towers, it also operates indoor towers for malls and casinos.
When you look at the numbers, AMT is a profit machine. For the last quarter it had revenues of $808 million, and while net income looked weak at $100 million, operating income including operations partly owned by others was $310 million, meaning the operating margins are extraordinary. The top line was growing more slowly than the top lines of its rivals, but once Global is added to the totals that should change.
American Tower Corp (NYSE:AMT) also has a slightly better balance sheet than its rivals, with debt of just 61% of assets, and the company was already on pace to generate $1.5 billion in cash flow for the year, before adding Global to the mix. Best of all, in part because of the structure, you do get a dividend here. It’s fairly small as REITs go, 27 cents or 1.51%, but it’s what this fast-growing company can afford.
The Foolish bottom line
If you are looking to invest in the tower business, I think AMT is the choice. It’s less speculative than its rivals and it pays a real dividend. If you are of a speculative nature, then SBA Communications Corporation (NASDAQ:SBAC) is a good place to play. If you’re looking for stability and an edge in Latin America, then Crown Castle International Corp. (NYSE:CCI) is the choice.
In any case it’s hard to go wrong.
The article AMT Deal Points to More Profitable Cell Tower Consolidation originally appeared on Fool.com and is written by Dana Blankenhorn.
Dana Blankenhorn has no position in any stocks mentioned. The Motley Fool recommends American Tower. The Motley Fool owns shares of American Tower and has the following options: short September 2013 $70 puts on American Tower.
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