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Can Higher Revenues Aid American Tower (AMT) in Q3 Earnings?

American Tower Corp. AMT is scheduled to release third-quarter 2018 results, before the opening bell on Oct 30. 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 6.74%. The company posted total revenues of $1.78 billion, beating the Zacks Consensus Estimate of $1.75 billion.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate in two occasions for as many misses. It delivered an average positive surprise of 0.82% during this period. The graph below depicts this surprise history:

American Tower Corporation (REIT) Price and EPS Surprise

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

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

Factors at Play

American Tower's international portfolio of wireless communications towers and network lends it competitive edge over its peers. In fact, in August, the company expanded its presence in Brazil with the purchase of telecom assets from Brazilian state-run utility company, Cia Energetica de Minas Gerais SA, or Cemig. Further, the Zacks Consensus Estimate for third-quarter 2018 international revenues is pegged at $792 million, remaining unchanged as compared to the reported tally in the previous quarter.

In addition, increased investment of wireless carriers in 4G LTE and 5G networks in the United States is expected to buoy the company's upcoming quarterly results. While 4G-equipped mobile devices require massive cell towers, increasing popularity of 5G may spur demand for American Tower's smaller structures that accommodate 5G airwaves.

The Zacks Consensus Estimate for gross margin from its U.S operations is pinned at $758 million and reflects a year-over-year increase of 5.8%. Also, total revenues are anticipated to be nearly $1.8 billion, highlighting year-over-year growth of 5.3%

However, since tower operations in the emerging markets are not as profitable as that in the mature U.S. market, the company's bottom line may witness a drag in the third quarter.

Lastly, American Tower's activities during the quarter could not gain adequate analyst confidence. In fact, the Zacks Consensus Estimate for third-quarter FFO per share remained unchanged at $1.82, over the past month. Nonetheless, it represents year-over-year growth of 5.2%.

Earnings Whispers

Here is what our quantitative model predicts:

American Tower has 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 +2.29%.

Zacks Rank: It currently carries a Zacks Rank of 3.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

A positive Earnings ESP is a meaningful and leading indicator of a likely beat in terms of FFO per share. This, when combined with a favorable Zacks rank, makes us reasonably confident of a positive surprise.

Stocks That Warrant a Look

Here are a few stocks in the real estate investment trust (REIT) sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

Iron Mountain Incorporated IRM , scheduled to release earnings on Oct 25, has an Earnings ESP of +0.62% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here.

Welltower Inc. WELL , slated to report Sep-end quarter results on Oct 30, has an Earnings ESP of +1.06% and a Zacks Rank of 3.

Public Storage PSA , set to release quarterly figures on Oct 30, has an Earnings ESP of +0.27% and a Zacks Rank #3.

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

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


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

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