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Will High Data Demand Drive American Tower (AMT) Q2 Earnings?

American Tower Corp. AMT is scheduled to release second-quarter 2020 results before the opening bell on Jul 30. 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, this wireless communications towers operator surpassed its adjusted funds from operations (AFFO) estimates by 3.9%. The company witnessed decent organic tenant billing growth.

Over the trailing four quarters, it surpassed estimates on all four occasions, the average surprise being 3.14%.

American Tower Corporation REIT Price and EPS Surprise

 

American Tower Corporation REIT Price and EPS Surprise

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

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

Navigating the challenges of the coronavirus outbreak, many companies have embraced remote working. Further, the pandemic has propelled a sharp increase in online purchases. Hence, the ‘stay-at-home’ economy has highlighted the urgent need for 5G network, accelerating the build-out of 5G wireless networks. Moreover, higher data usage has compelled network carriers to increase spending to address network capacity issues during the quarter under review.

This has acted as a catalyst for cell tower REITs, which are anticipated to have benefited from the high demand for towers and stronger leasing activities.

As for American Tower, the tailwinds are expected to have helped its core tower business to deliver organic growth in site rental revenues and organic tenant billings. Further, the company’s long-term contracts, with built-in escalators, provide extremely stable and recurring revenues even in such unprecedented times.

The Zacks Consensus Estimate for second-quarter 2020 revenues is pegged at $1.95 billion, indicating a rise of 3.3% from the year-ago reported figure. This is expected to have been supported by growth in its property segment revenues, which is pinned at $1.93 billion and indicates year-over-year growth of 4.4%.

Additionally, efficiencies throughout the business are anticipated to have driven margin improvements. This along with probable higher revenues in the U.S. property segment is expected to increase U.S. property gross margin 10.8% to $899 million.

However, American Tower’s expansion efforts in emerging markets might have not been encouraging as tower operations in such markets are not as profitable as that in the mature U.S. market. In fact, the consensus estimate for second-quarter revenues from international operations is pinned at $833 million, indicating a 1.1% decline from the year-ago reported figure. 

American Tower’s activities during the quarter were inadequate to gain adequate analyst confidence. Notably, the Zacks Consensus Estimate for second-quarter FFO per share has been unchanged at $2.05, over the past month. Nonetheless, it represents a year-over-year increase of 2%.

Here is what our quantitative model predicts:

American Tower does not have 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 0.00%.

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 a few stocks in the 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:

STAG Industrial Inc. STAG, set to report quarterly numbers on Jul 28, currently has an Earnings ESP of +1.80% and a Zacks Rank of 3.

Iron Mountain Incorporated IRM, slated to release second-quarter earnings on Aug 6, has an Earnings ESP of +4.76% and a Zacks Rank of 3 at present.

SBA Communications Corporation SBAC, set to report quarterly numbers on Aug 3, currently has an Earnings ESP of +4.48% and a Zacks Rank of 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.

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