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America Movil (AMX) Misses Q1 Earnings, Tops Revenues

America Movil S.A.B. de C.V. AMX reported first-quarter 2016 earnings per ADR (American Depository Receipt) of 8 cents, significantly below the Zacks Consensus Estimate of 26 cents. For the second consecutive quarter, the company’s profit margin in Mexico, its biggest market, fell below the level of 40% (to 35.7%). Stringent regulatory measures and intensifying competition in Mexico were the primary reasons for the poor performance.

Nevertheless, America Movil’s foreign exchange rate losses were down 7.5% year over year as the Mexican peso, the Brazilian real and the Colombian peso showed very slight depreciation with respect to the U.S. dollar in the reported quarter.

Total revenue of approximately $12,933 million in the reported quarter rose 1.4% on a year-over-year basis. Moreover, the top line outpaced the Zacks Consensus Estimate of $12,510 million. Segment-wise, Services revenues were around $11,269.5 million, up 0.3% year over year. Equipment revenues totaled $1,663.5 million, up 9% year over year on growing demand for smartphones and tablets.

Total costs and expenses in the first quarter increased 6.3% year over year to $9,352.6 million. Quarterly EBITDA declined 9.6% year over year to $3,580.6 million. EBITDA margin was 27.7% compared with 31% in the year-ago quarter.

Liquidity

At the end of the first quarter of 2016, America Movil had around $5,642 million of cash and marketable securities compared with $5,918 million at the end of 2015. Total debt, at the end of the reported quarter was around $39,123 million against $39,853 million at the 2015-end. The debt-to-capitalization ratio at first quarter 2016-end was 0.76 compared with 0.77 at 2015-end.

Subscriber Statistics

America Movil's total subscriber count was approximately 365 million as of Mar 31, 2016, down 0.8% year over year. This figure includes about 284 million wireless subscribers, 34 million landlines, 26 million broadband accesses and 22 million pay-TV units.

Results by Prime Regional Segments

Quarterly revenues from Mexico, America Movil's home ground, declined 2.6% year over year to $3,759.3 million. EBITDA plunged 16.7% to $1,342.3 million. Mexican ARPU (average revenue per user) decreased 15.4% year over year to $7.66 while the churn rate was 4.1%, compared with 3.8% in the first quarter of 2015.

Revenues from Brazilian operations dropped 0.7% year over year to $2,292.2 million. EBITDA increased 1.2% to $603.4 million. Meanwhile, Brazilian ARPU rose 2.5% year over year to $3.58 while the churn rate was 36% compared with 3.1% in the year-ago quarter.

Revenues from America Movil's U.S. operation (Tracfone) declined 3.3% year over year to $1,755 million. EBITDA decreased 24.2% to $162 million. ARPU came in at $21 compared with $20 in the year-ago quarter, while the churn rate dropped 20 basis points to 4.3%.

Stocks to Consider

America Movil currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in this sector include BlackBerry Ltd. BBRY, NTT DOCOMO Inc. DCM, and KT Corp. KT. All three stocks hold a Zacks Rank #1 (Strong Buy).

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