American Tower (AMT) to Post Q4 Earnings: Will It Disappoint?

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American Tower Corp.AMT is scheduled to release fourth-quarter 2017 results, before the opening bell on Feb 27.

The company's bottom-line surpassed the Zacks Consensus Estimate in the trailing four quarters, the average beat being 3.94%.

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

Factors at Play

American Tower faces fierce competition in the global wireless tower market from large incumbents like Crown Castle International Corp. CCI and SBA Communications Corp. SBAC .  

The company has a substantially leveraged balance sheet. At the end of third-quarter 2017, it had $799.47 million in cash and cash equivalents and around $18,581.4 million of outstanding long-term debt compared with $787.16 million and $18,294.7 million, respectively, at the end of December 2016. Such high debt levels may impede sufficient cash flow generation, which is needed to meet future debt obligations. Moreover, this may restrain the company from accessing the debt market and refinancing at suitable rates.

Customer concentration is very high for American Tower and the top four customers account for nearly 65% of its quarterly revenues. The loss of any of these customers or consolidation    among them will have a significant material impact on the top line. Moreover, the ongoing consolidation trend among telecom and cable TV operators may generate significant financial fluctuations for the company.

Buoyed by such headwinds, American Tower's shares have lost 5.6% in the last three months. However, the stock performance was better than the industry 's decline of 13.3%.

Meanwhile, the company generates most of its revenues from long-term (typically 5-10 year) tower leases with major wireless carriers. Additionally, it provides on-site maintenance and servicing of antennas, amplifiers, and base station equipment. Since moving equipment from one tower to another is cumbersome, carriers normally renew these contracts upon expiration. This generates a strong long-term lease up-cycle.

The revenues generated from leasing and management of such networks is remarkable and over 95% is recurring in nature. Moreover, most of its towers are over 210 feet tall, consequently providing sufficient space for its customers to install transmission equipment. The company also owns 29% of the land under its towers in the United States

India, EMEA and Latin American markets together have contributed nearly 50% of the organic core revenue growth. Meanwhile, total international revenues amounted to $751 million, up 13.6% year over year. Within this, revenues from Asia totaled $298 million, up 10.4% year over year. EMEA revenues grossed $155 million, up 18.3% year over year. Latin America revenues totaled $298 million, up 14.6% year over year. The company's total revenues from international business are likely to outperform the U.S. revenues in the next three to seven years.

Earnings Whispers

Our proven model does not conclusively show that American Tower is likely to beat the Zacks Consensus Estimate 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) to beat estimates. Unfortunately, that is not the case here as elaborated below.

Zacks ESP:Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -0.15%%. You can uncover the best stocks to buy or sell before they're reported with the Earnings ESP Filter .

Zacks Rank: American Tower has a Zacks Rank #4 (Sell).

Notably, we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company has not witnessed any estimate revisions.

American Tower Corporation (REIT) Price and EPS Surprise

American Tower Corporation (REIT) Price and EPS Surprise | American Tower Corporation (REIT) Quote

Key Pick

Getty Realty Corp. GTY has the right combination of elements to deliver an earnings beat when it reports fourth-quarter 2017 results on Fed 28. Getty has an Earnings ESP of +2.98% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

Getty's bottom-line surpassed the Zacks Consensus Estimate in two of the previous four quarters, while lagging the other two. This led to an average beat of 5.71%.

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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

Getty Realty Corporation (GTY): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: AMT , CCI , SBAC , GTY

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