NEW YORK (TheStreet) -- Shares of America Movil SAB de CV (AMX) are higher by 3.95% to $21.56 in pre-market trading after the company announced yesterday that it will sell some assets to "reduce its national market share in the Mexican telecommunications market under 50%."
Mexican billionaire Carlos Slim agreed to the breakup of the company's Mexican phone operations in order to avoid restrictions placed on America Movil due to its dominance in the market, which would damage profits, Bloomberg reports.
American Movil is the largest operator in the Americas with 272 million wireless subscribers.
Must Read: Warren Buffett's 25 Favorite Stocks
Slim and his family own 57% of America Movil, and agreed to separate its wireless towers from the rest of the business, while also giving up its rights to buy the satellite TV provider Dish Mexico (DISH), Bloomberg added.
America Movil will divest some assets to a newly formed independent company, as part of its effort to appease Mexico's Congress, which was debating a bill that would impose harsh penalties on industry dominant companies.
Separately, TheStreet Ratings team rates AMERICA MOVIL SA DE CV as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate AMERICA MOVIL SA DE CV (AMX) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for AMERICA MOVIL SA DE CV is rather high; currently it is at 54.70%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, AMX's net profit margin of 7.10% significantly trails the industry average.
- AMX, with its decline in revenue, slightly underperformed the industry average of 2.4%. Since the same quarter one year prior, revenues slightly dropped by 4.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Wireless Telecommunication Services industry and the overall market, AMERICA MOVIL SA DE CV's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The debt-to-equity ratio is very high at 2.38 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, AMX has a quick ratio of 0.59, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- In its most recent trading session, AMX has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full analysis from the report here: AMX Ratings Report