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American Tower (AMT) Q2 Earnings: A Disappointment in Store?

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Leading international wireless tower operator, American Tower Corp. (AMT - Free Report) is scheduled to report second-quarter 2017 financial numbers on Jul 27, before market opens.

Last quarter, the company posted a positive earnings surprise of 4.64%. Moreover, earnings surpassed the Zacks Consensus Estimate in all the last four quarters, with an average beat of 4.78%.

The price performance of American Tower has also been impressive over the last six months. The stock returned 31.7%, outshining the industry’s gain of 3.4% over the same time frame.

Let’s see how things are shaping up for this announcement.

Factors at Play

Customer concentration is very high for American Tower. The company’s major customers include AT&T, Sprint Nextel, T-Mobile and Verizon Wireless. They account for nearly 65% of American Tower’s quarterly revenues. The loss of any one of these customers or consolidations will have a significant material impact on the company’s top line. 

American Tower is rapidly expanding in the international markets. Although this geographic diversification will boost revenues, it may jeopardize the bottom line as tower operations in the emerging markets are not as profitable as that in the mature U.S. market. Also, it increases the company’s exposure to foreign currency exchange rate risks.

Moreover, stiff competition, integration risks, rising operating expenses and a highly leveraged balance sheet act as major dampeners to American Tower. In addition, the ongoing consolidation trend among telecom and cable TV operators may lead to serious financial fluctuation for the company in the to-be-reported quarter.

The company’s upcoming results also face threats from emerging technologies like Voice over WiFi (VoWiFi). Moreover, American Tower competes fiercely with tower operators like Crown Castle International Corp. (CCI - Free Report) and SBA Communications Corp. (SBAC - Free Report) .

Nevertheless, American Tower continues to benefit from increased investment of wireless carriers in 4G LTE and 5G networks. We further believe that the company’s tower buyouts in emerging markets and long-term tower leases with major wireless carriers have driven its top line and lend it a competitive edge over rivals. American Tower’s Indian, EMEA and Latin American operations account for almost 50% of its organic core-revenue growth.

Earnings Whispers                                            

Our proven model does not conclusively show that American Tower is likely to beat on earnings 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. That is not the case here, as you will see below.

Zacks ESP: American Tower has an Earnings ESP of -1.94%. This is because the Most Accurate estimate stands at $1.52, lower than the Zacks Consensus Estimate of $1.55. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: American Tower has a Zacks Rank #4 (Sell).

We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

American Tower Corporation (REIT) Price and EPS Surprise

Stock to Consider

Hilltop Holdings Inc. (HTH - Free Report) from the broader industry has the right combination of elements to post an earnings beat when it expectedly reports second-quarter 2017 results on Jul 27. The company has an Earnings ESP of +2.33 % and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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