We expect American Tower Corporation (AMT - Analyst Report) , a leading communication tower operator, to beat expectations when it reports second-quarter 2013 results on Jul 31, 2013, before the market opens.
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, stands at +3.77%. This is very meaningful and a leading indicator of a likely positive earnings surprise.
Zacks #3 Rank (Hold): AMT currently has a Zacks Rank #3. Note that stocks with Zacks Ranks of #1 (Strong Buy), #2 (Buy) or #3 (Hold) have a significantly higher chance of beating earnings.
The combination of AMT’s Zacks Rank #3 (Hold) and +3.77% ESP makes us very confident of a positive earnings beat on Jul 30, 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 second quarter.
In addition to U.S., the company has seen strong leasing activity in Latin America, South Africa and India, which are expected to contribute to the company’s top line.
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 want to consider on the basis of our model which shows that they have the right combination of elements to post an earnings beat this quarter are as follows:
Winthrop Realty Trust currently has Earnings ESP of +3.70% and holds a Zacks Rank #1 (Strong Buy).
Leap Wireless International Inc. has Earnings ESP of +6.06% and carries a Zacks Rank #3 (Hold).
Ntelos Holdings Corp. has Earnings ESP of +31.03% and carries a Zacks Rank #3 (Hold).