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What's in the Cards for American Tower (AMT) in Q3 Earnings?

Leading international wireless tower operator, American Tower Corp AMT is scheduled to report third-quarter 2017 financial numbers on Oct 31, before the opening bell.

Last quarter, the company delivered a positive earnings surprise of 4.35%. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in all the last four quarters, with an average beat of 3.91%.

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

Factors at Play

American Tower continues to benefit from increased investment of wireless carriers in 5G networks. Next-generation 4G LTE, 5G networks and increased usage of smartphones and tablets are driving demand for tower leasing. Additionally, the company’s increased investments in Asia are paying off. These benefits are likely to be reflected in the upcoming quarterly results. Further, we believe that the company’s tower buyouts in emerging markets and long-term tower leases with major wireless carriers should drive top line and lend it a competitive edge over rivals. American Tower’s Indian, EMEA and Latin American operations account for almost 50% of its organic core revenue growth.

We are also impressed with American Tower’s efforts to reward stockholders with a quarterly cash distribution of 66 cents per share of the company’s common stock. The distribution was paid on Oct 17 to stockholders of record at the close of business on Sep 29.

However, American Tower has a substantially leveraged balance sheet with around $17,509.9 million of outstanding long-term debt in the last reported quarter. Such high debt levels may impede sufficient cash flow generation, which is rerquired to meet future debt obligations.

High-customer concentration is likely to have an adverse impact on the company’s top line. Expansion in the global market increases the company’s exposure to foreign currency exchange rate risks. Stiff competition, integration risks and rising operating expenses are other headwinds. Additionally, the company’s upcoming results face threats from emerging technologies like Voice over WiFi (VoWiFi). Also, American Tower competes fiercely with tower operators like Crown Castle International Corp CCI and SBA Communications Corp SBAC.

We believe that such headwinds have led to the company’s disappointing price performance. Over the past three months, the stock has declined 0.4% compared with the industry’s decline of 1.7%.

 

 

A Closer View on Certain Important Metrics

American Tower’s Indian, EMEA and Latin American operations account for almost 50% of its organic core revenue growth. Per the Zacks Consensus Estimate, the company will generate $295 million from Asia, $165 million from EMEA, $293 million from Latin America and $904 million from the United States. Meanwhile, total international revenues are estimated at $753 million.

As of Sep 30, the company is projected to own 1,48,047 towers, with 39,843 towers in the domestic market and 1,07,911 towers internationally.

Earnings Whispers

Our proven model does not conclusively show that American Tower is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: American Tower has an Earnings ESP of -1.54%. This is because the Most Accurate estimate is at $1.64, while the Zacks Consensus Estimate is pegged at $1.67. You can uncover the best stocks to buy or sell before they’re reported with our https://www.zacks.com/premium/esp-buy?adid=zp_article_espfil...">Earnings ESP Filter.

Zacks Rank: American Tower has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

 

 

Key Pick

Boston Properties, Inc BXP from the broader Finance sector has the right combination to deliver an earnings beat when it reports third-quarter 2017 results on Nov 2. The company has an Earnings ESP of +0.50% and a Zacks Rank #3. You can see https://www.zacks.com/stocks/buy-list/?ADID=zp_1link&ICI... _1link">the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters, with an average beat of 0.93%.

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American Tower Corporation (REIT) (AMT): Free Stock Analysis Report
 
Crown Castle International Corporation (CCI): Free Stock Analysis Report
 
SBA Communications Corporation (SBAC): Free Stock Analysis Report
 
Boston Properties, Inc. (BXP): Free Stock Analysis Report
 
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