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What's in the Cards for American Tower (AMT) in Q4 Earnings?

Zacks Equity Research
Growth stocks & ETFs tend to outperform during an uptrend.

American Tower Corp. AMT is scheduled to release fourth-quarter 2018 results before the opening bell on Feb 27. The company’s results will likely reflect year-over-year rise in its funds from operations (FFO) per share and revenues.

In the last reported quarter, this wireless communications towers operator surpassed its adjusted funds from operations (AFFO) estimates by 1.6%. The company generated total revenues of $1.79 billion, beating the Zacks Consensus Estimate of $1.77 billion.

Over the trailing four quarters, the company surpassed the consensus estimate on two occasions for as many misses. It delivered average positive surprise of 0.33% during this period.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

The move toward 5G telecommunications technology is driving strong carrier spending. In the December-end quarter too, we anticipate higher investment on 5G deployment to have accelerated activity for tower companies like SBA Communications Corporation SBAC and American Tower.

American Tower generates strong recurring revenues from its long-term leases that have embedded rent escalators. We anticipate its predicable business model to have provided stable cash flows while rent escalators should have boosted organic growth in the fourth quarter.

Further, the company continues to expand its international presence on the back of acquisitions. In October, it closed previously-announced acquisitions of more than 700 sites in Kenya for nearly $172 million. These buyouts are expected to contribute to American Tower’s growth in its international markets.

Other than an enviable national presence, American Tower has a significant footprint in India where new mobile user subscribers are expected to increase in the upcoming years. However, Indian carrier consolidation-driven churn continues to hinder growth in organic tenant billings and result in revenues lost from cancellations.

Also, the company has a concentrated tenant base, with most of its revenues being generated by top few mobile carriers. Hence, any unfavorable development in the customer’s business or loss of any of its customers is expected to have impacted the company’s top line during the quarter.  

Lastly, American Tower’s activities during the quarter could not gain adequate analyst confidence. In fact, the Zacks Consensus Estimate for fourth-quarter FFO per share remained unchanged at $2.30, over the past month. Nonetheless, it represents year-over-year growth of 44.6%.

Earnings Whispers

Here is what our quantitative model predicts:

American Tower does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The company’s Earnings ESP is 0.00%.

Zacks Rank: It currently carries a Zacks Rank of 3 which increases the predictive power of ESP. However, we also need a positive ESP to be confident of a positive surprise.

Stocks That Warrant a Look

Hersha Hospitality Trust HT, scheduled to release earnings on Feb 25, has an Earnings ESP of +3.45% and holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Senior Housing Properties Trust SNH, set to release earnings on Mar 1, has an Earnings ESP of +36.36% and holds a Zacks Rank of 2.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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American Tower Corporation (REIT) (AMT) : Free Stock Analysis Report
 
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