Leading global wireless communications tower operator, American Tower Corporation, is scheduled to report its second-quarter 2014 financial numbers on July 30, 2014, before the opening bell.
In the previous quarter, the company’s earnings had topped the Zacks Consensus Estimate by a margin of 4.08%. Let’s see how things are shaping up for this announcement.
Factors to be Considered this Quarter
American Tower is rapidly expanding in international markets, especially in the emerging Asian and Latin American markets. Although this geographic diversification will boost revenues for the company, it may jeopardize the bottom line. Tower operations in the emerging markets are not as profitable as in the mature U.S. market. In the previous quarter, gross margin from international operations stood at 61%, significantly lower than 82% margin from the U.S. operations.
Our proven model does not conclusively show that American Tower Corporation 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) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: American Tower Corporation has a negative Zacks ESP. This is because the Most Accurate estimate stands at 51 cents while the Zacks Consensus Estimate is pegged at 52 cents. This leads to an ESP of -1.92% for American Tower Corporation.
Zacks Rank: American Tower Corporation carries a Zacks Rank #3 which increases the predictive power of ESP. But when combined with a -1.92% ESP, it lowers the possibility of an earnings surprise.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter.
Digital Realty Trust Inc. has an earnings ESP of +0.83% and carries a Zacks Rank #3.
Parkway Properties Inc. has an earnings ESP of +6.06% and carries a Zacks Rank #2.
SL Green Realty Corp. has an earnings ESP of +0.69% and carries a Zacks Rank #2.