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

American Tower Corporation AMT is scheduled to release third-quarter 2022 results before the opening bell on Oct 27. While the company’s revenues are likely to have witnessed year-over-year growth, funds from operations (FFO) per share are expected to have declined.

In the last quarter, American Tower surpassed adjusted FFO per share estimates by 6.15%. The quarterly results reflected an improvement in revenues across its Property segment. It also recorded decent year-over-year organic tenant billings growth of 2.6% and total tenant billings growth of 7.8%.

Over the preceding four quarters, the company topped FFO per share estimates on each occasion, the average beat being 3.47%. The graph below depicts this surprise history:

American Tower Corporation Price and EPS Surprise

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

Factors to Note

The advancement in mobile technology, such as the 4G and 5G networks, and the proliferation of bandwidth-intensive applications have driven the growth in mobile data usage globally. Also, rampant usage of network-intensive applications for video conferencing and cloud services, and remote-working scenarios have fueled the rise.

This has resulted in wireless service providers and carriers expanding their networks and deploying additional equipment for existing networks to boost their network coverage and capacity to meet the rising consumer demand.

This upbeat trend is likely to have driven the demand for American Tower’s portfolio of communications sites during third-quarter 2022, aiding its top-line performance.

American Tower has a resilient and stable business model. It generates most of its revenues from non-cancellable, long-term (typically 5-10 year) tower leases with major wireless carriers with multiple renewal period options. This is expected to have supported stable cashflows for the company in the to-be-reported quarter.

With customers leveraging on the dynamically scalable solutions and interoperability provided by CoreSite’s national ecosystem, the demand for American Tower’s highly interconnected data center facilities and critical cloud on-ramps is anticipated to have remained robust during the quarter.

Also, AMT is most likely to have capitalized on the strong secular growth trends of the wireless industry that have been driving increased network coverage and densification initiatives among its customers.

Further, the company’s solid balance-sheet strength is expected to have aided its investments in the existing 4G networks as well as its efforts for 5G deployment during the quarter under discussion.

The Zacks Consensus Estimate for third-quarter 2022 revenues is pegged at $2.67 billion, indicating a rise of 8.6% from the year-earlier period.

The Zacks Consensus Estimate for operating revenues from the Property segment is pegged at $2.59 billion, indicating growth from $2.36 billion reported in the year-ago period.

However, the operating revenues from the Service segment are expected to be on the lower side in the to-be-reported quarter. The Zacks Consensus Estimate for the same is pegged at $57 million, indicating a decline from $85 million reported in the prior-year quarter.

AMT is exposed to adverse foreign currency fluctuations, given its extensive international presence. This is anticipated to have had a negative impact on the company’s performance in the quarter.

Also, a hike in interest rates is anticipated to have raised interest expenses and borrowing costs to purchase or develop real estate.

American Tower’s activities during the third quarter were not adequate to secure analysts’ confidence. The Zacks Consensus Estimate for quarterly FFO per share has been revised marginally downward to $2.42 over the past month. Also, it suggests a year-over-year decline of 2.8%.

What Our Quantitative Model Predicts

Our proven model does not conclusively predict an FFO beat for AMT this time. The right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that is not the case here.

Earnings ESP: American Tower has an Earnings ESP of -1.31%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Stocks That Warrant a Look

Here are some stocks that are worth considering from the REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:

Cousins Properties CUZ is slated to release third-quarter earnings on Oct 27. CUZ has an Earnings ESP of +1.01% and a Zacks Rank #3 at present.

SBA Communications SBAC is slated to report quarterly numbers on Oct 31.
SBAC has an Earnings ESP of +0.44% and carries a Zacks Rank #3 presently.

Public Storage PSA is scheduled to report quarterly figures on Nov 1. PSA has an Earnings ESP of +1.34% and a Zacks Rank of 3 currently.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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