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We expect Crown Castle International (CCI - Analyst Report), the leading communication tower operator in the U.S., to beat expectations when it reports its first-quarter 2013 results after the market closes on Apr 24, 2013.

Why a Likely Positive Surprise?

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

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +200.00%. This is a meaningful and leading indicator of a likely positive earnings surprise.

Zacks #3 Rank (Hold): Crown Castle currently has a Zacks Rank #3. Note that the stocks with Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 (Hold) have a significantly higher chance of beating the earnings. 

The combination of Crown Castle’s Zacks Rank #3 (Hold) and +200.00% ESP makes us confident of a positive earnings beat on Apr 24, 2013.

What is Driving the Better-Than-Expected Earnings?

Crown Castle is expected to benefit from the unprecedented adaptation of smartphones, which has propelled the demand for towers by large carriers. Additionally, continuous amendment of the LTE networks by the four major U.S. carriers will help Crown Castle to bolster its top line in the first quarter.  Acquisition of 7,200 T-Mobile USA towers has extended  Crown Castle’s reach in the top 100 markets in the U.S. and the company will profit from the excess leasing capacity available in those towers.

Despite such strong fundamentals, Crown Castle has a highly leveraged balance sheet, which may act as a headwind for the company going forward. Additionally, continuous change in technology and higher customer concentration may exert further pressure on the company’s profitability.  

Other Stocks to Consider

Other companies which can be considered on the basis of our model, and which have the right combination of elements to post an earnings beat this quarter are as follows:

Research in Motion Limited (BBRY - Analyst Report) currently has an Earnings ESP of +100.00% and holds a Zacks Rank #2 (Buy).

Sprint Nextel Corporation (S - Analyst Report) has an Earnings ESP of +20.00% and holds a Zacks Rank #3 (Hold).

AMT Corporation (AMT - Analyst Report) has an Earnings ESP of +6.25% and carries a Zacks Rank #3 (Hold).

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