How Will American Movil (AMX) Stock React To Sale of Phone Assets?

NEW YORK (TheStreet) -- American Movil SA de CV  (AMX) , Latin America's largest wireless provider, hired Bank of America Corp. (BAC) to sell phone assets as part of a breakup plan to appease Mexican lawmakers, sources told Bloomberg Businessweek.

Potential buyers include AT&T (T)  and SoftBank Corp. (SFTBF) , sources added.

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America Movil, controlled by billionaire Carlos Slim, is seeking to sell parts of its Mexican operations to cut the company's market share below 50% and avoid new regulations designed to rein in its dominance, Businessweek said.

The company has 70% of Mexico's mobile subscribers and about 80% of its landlines.

Shares of American Movil closed at $24.51 on Friday.

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 a number of strengths, 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 solid stock price performance, revenue growth, growth in earnings per share, expanding profit margins and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 26.24%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year.Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • The revenue growth significantly trails the industry average of 54.8%. Since the same quarter one year prior, revenues rose by 10.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • AMERICA MOVIL SA DE CV reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in 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 ($1.78 versus $1.56).
  • The gross profit margin for AMERICA MOVIL SA DE CV is rather high; currently it is at 54.45%. Regardless of AMX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AMX's net profit margin of 9.28% is significantly lower than the industry average.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. 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
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