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We expect American Tower Corp. (AMT - Analyst Report), world’s largest communication tower operator, to beat expectations when it reports its first-quarter 2013 results before the market opens on May 1, 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.

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 +6.25%. This is a meaningful and leading indicator of a likely positive earnings surprise.

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

The combination of AMT’s Zacks Rank #3 (Hold) and +6.25% ESP makes us confident of a positive earnings beat on May 1, 2013.

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. This will generate a long-run sustainable business for the company.

Despite such strong fundamentals, AMT has a highly leveraged balance sheet. This may act as a headwind for the company while accessing the debt market to borrow and refinance at favorable rates. Additionally, higher customer concentration and huge exposure to foreign exchange risks may exert further pressure on the company’s 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:

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

Comcast Corporation (CMCSA - Analyst Report) has an Earnings ESP of +4.08% and holds a Zacks Rank #3 (Hold).

Dish Network Corporation (DISH - Analyst Report) has an Earnings ESP of +1.89% and carries a Zacks Rank #3 (Hold).

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