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What's in the Cards for American Tower (AMT) in Q1 Earnings?

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American Tower Corp. AMT is scheduled to release first-quarter 2021 results before the opening bell on Apr 29. The company’s results are expected to reflect year-over-year increases in revenues and funds from operations (FFO) per share.

In the last reported quarter, the operator of wireless communication towers missed adjusted funds from operations (AFFO) estimates by 0.48%. Despite witnessing strong organic tenant billing growth, revenues in the Asia Pacific and Latin America property segments declined, denting the quarterly performance.

Over the trailing four quarters, the company surpassed estimates on all three occasions and missed in the other, the average surprise being 2.91%.

American Tower Corporation Price and EPS Surprise

American Tower Corporation Price and EPS Surprise
American Tower Corporation Price and EPS Surprise

American Tower Corporation price-eps-surprise | American Tower Corporation Quote

Let’s see how things have shaped up prior to this announcement.

In the first quarter, tower REITs like American Tower, Crown Castle International Corp CCI and SBA Communications SBAC are expected to have continued benefitting from secular growth trends in the wireless industry. Also, as data volume for wireless and wired networks is growing rapidly amid the widespread adoption of smartphones and applications, network carriers are likely to have continued to increase their spending on network deployments to improve and densify their cell sites and coverage in the first quarter.

As for American Tower, the company’s unmatched geographically diversified portfolio of distributed sites is likely to have enabled it to enjoy strong demand for its assets. Moreover, it is expected to have continued capturing a meaningful share of new leasing activity in the tower industry.

These new leases are expected to have increased its straight-line revenues, thereby, boosting property revenues and adjusted EBITDA. Also, new revenues from leasing additional space and contractual rent escalations in the March-end quarter on existing tenant leases are anticipated to have aided tenant billings growth.

Other than this, the company’s resilient and stable business model, consisting of built-in escalators on all its leases, is anticipated to have supported its revenue growth in the first quarter.

Further, prior investment efforts in a number of international and national markets are likely to have expanded its portfolio and tenancy, and contributed to revenues. Notably, in the prior quarter, American Tower added approximately 3,000 communications sites to its portfolio with the acquisition of InSite Wireless Group, LLC, for $3.5 billion, including debt. The transaction marked American Tower’s entry in Canada and Australia, and also enabled it to fortify presence in the United States.

Also, given the company’s sequential hike of 2.4% in the quarterly dividend in March, we expect the company’s financial position and liquidity to have remained strong in the quarter under review.

The Zacks Consensus Estimate for first-quarter 2021 revenues is pegged at $2.18 billion, indicating a rise of 9.4% from the year-ago reported figure. This is expected to have been supported by growth in its property segment’s revenues. In fact, the Zacks Consensus Estimate for operating revenues from the property segment is pegged at $2.15 billion, indicating growth of 9% from the prior year’s reported figure.

However, the merger between T-Mobile and Sprint, which closed in April 2020, resulted in tower site overlap for American Tower. Hence, given Sprint contractual lease cancellations and non-renewals, churn rate in American Tower’s U.S. & Canada property segment is likely to have been elevated in the first quarter, affecting overall organic tenant billing growth.

Additionally, because tower operations in the emerging markets are not as profitable as that in the mature U.S. markets, operating profit margins from international businesses are likely to have been less relative to the U.S. segment. Moreover, elevated churn in certain emerging markets where the company operates is likely to drag results.

Any unfavorable impact of foreign currency exchange rate fluctuations on property revenues will also hinder its results.

Prior to the first-quarter earnings release, American Tower’s activities during the January-March period were adequate to gain adequate analyst confidence. Notably, the Zacks Consensus Estimate for first-quarter FFO per share has been revised marginally upward to $2.32 over the past week. Also, it suggests a year-over-year increase of 9.4%.

Key Developments in Q1

In mid-March, American Tower entered a master lease agreement with DISH Network DISH through which the latter may lease space on up to 20,000 of American Tower’s communications sites.

With this, the carrier has secured access to American Tower’s extensive portfolio of communication sites in the United States to deploy its new nationwide 5G network. As for American Tower, the lease agreement will enhance its long-term U.S. organic growth trajectory.

Here is what our quantitative model predicts:

American Tower has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of a FFO beat.

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

Earnings ESP: The Earnings ESP for American Tower is +0.52%.

Zacks Rank: American Tower currently carries a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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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