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We expect American Tower Corp. (AMT - Analyst Report), the largest communication tower operator in the world, to beat expectations when it reports third-quarter 2013 results before the market opens on Oct 30, 2013.

Why a Likely Positive Surprise?

Our proven model shows that AMT is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: The Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +5.66%. This is a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: AMT currently has a Zacks Rank #3 (Hold). Note that the stocks with Zacks Rank #1, 2 or 3 have a significantly higher chance of beating the earnings. The Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.

The combination of AMT’s Zacks Rank #3 and +5.66% Earnings ESP makes us confident of a positive earnings beat.

What is Driving the Better-Than-Expected Earnings?

AMT is expected to benefit from the unprecedented demand for wireless voice, data and video networks, which has propelled the demand for tower space by carriers. Increased adaptation of smartphones coupled with continuous amendment of the LTE networks by the four major U.S. carriers will also help AMT to bolster its top line in the first quarter.  In addition to Brazil and Mexico, AMT has taken a major initiative to expand its operations in India. As a result, the company is continuously acquiring towers which, we believe, will generate long-term sustainable business for the company.

Despite such strong fundamentals, AMT has a highly leveraged balance sheet, which may impede borrowing and refinancing at favorable rates. Additionally, higher customer concentration and considerable exposure to foreign exchange risk may hurt profitability.  

Other Stocks to Consider

Other companies you may consider on the basis of our model, which have the right combination of elements to post an earnings beat this quarter, are as follows:

Cubic Corporation (CUB - Snapshot Report) with Earnings ESP of +4.35% and a Zacks Rank #2 (Buy).

EastGroup Properties Inc. (EGP - Snapshot Report) with Earnings ESP of +1.21% and a Zacks Rank #2 (Buy).

Motorola Solutions Inc. (MSI - Analyst Report) with Earnings ESP of +2.04% and a Zacks Rank #2 (Buy).

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