NEW YORK (TheStreet) -- Shares of American Movil (AMX) are up 2.20% to $23.73 on heavy trading volume as the Mexico-based communications company plans a spin off of its wireless towers in Mexico as it studies how to break apart its wireless and land-line phone operations there, where tougher regulations are cutting into profits, Bloomberg reports
A spin off will better reflect the value of the towers, which can be rented to competitors, CEO Daniel Hajj said today.
Earlier, the company reported that sales for the second quarter gained 4% to $15.66 billion, ahead of analysts estimates of $15.35 billion. Also, that its profit was up 2.4% from the previous year to $5.1 billion.
TheStreet Ratings team rates AMERICA MOVIL SA DE CV as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate AMERICA MOVIL SA DE CV (AMX) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
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.
- AMERICA MOVIL SA DE CV's earnings per share declined by 48.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, AMERICA MOVIL SA DE CV reported lower earnings of $1.56 versus $1.85 in the prior year. This year, the market expects an improvement in earnings ($1.86 versus $1.56).
- AMX, with its decline in revenue, slightly underperformed the industry average of 2.7%. 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.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- 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.
- You can view the full analysis from the report here: AMX Ratings Report