Why American Movil (AMX) Stock Is Up Today

NEW YORK (TheStreet) -- Shares of American Movil SAB de CV (AMX) are up 2.37% to $26.32 after it was reported that the company controlled by billionaire Carlos Slim contacted potential suitors including AT&T (T) and SoftBank (SFTBF) as it prepares to sell assets along the east coast of Mexico that could be worth up to $17.5 billion, sources told Bloomberg.

The company is also pitching the sale to BCE Inc.'s (BCE) Bell Canada and China Mobile (CHL) , sources said. The sale will include American Movil's infrastructure in a strip of states from north to south along Mexico's eastern coast, according to sources.

The assets could be valued at five to seven times earnings before interest, taxes, depreciation and amortization of $2.5 billion, sources told Bloomberg, implying a value of as much as $17.5 billion. America Movil hasn't yet asked for bids because the preliminary information, or teasers, didn't provide enough details for a company to make an offer, sources added.

 
The Mexico City-based carrier, which commands 70% of the local wireless market and 80% of land lines, is selling assets in its biggest market to appease regulators as antitrust penalties curb profit. The company may get penalties revoked if it cuts market share below 50%.
 

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 several positive factors, 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:

  • Powered by its strong earnings growth of 61.53% and other important driving factors, this stock has surged by 25.44% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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 61.5%. 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 ($1.72 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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