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What's in Store for Uniti Group (UNIT) This Earnings Season?

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Uniti Group Inc. (UNIT - Free Report) , formerly Communications Sales & Leasing, Inc., is scheduled to release fourth-quarter 2018 results on Feb 28, after the closing bell. The company’s results will likely reflect year-over-year rise in its revenues, while funds from operations (FFO) per share are expected to have remained flat.

In the last reported quarter, this real estate investment trust (REIT), involved in the acquisition and construction of communication infrastructure, missed the adjusted funds from operations (AFFO) estimates by 1.6%. The company generated total revenues of $174.8 million, indicating year-over-year growth of 1.8%.

Over the trailing four quarters, the company missed the consensus estimate on three occasions and surpassed in the other. It delivered average positive surprise of 7.14% during this period.

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

Factors at Play

Growing popularity of Internet of Things, machine-to-machine, autonomous vehicles, big data and mobile video is leading to rapid expansion of wireless data. In fact, as carriers continue to densify their networks and wireless operators increase investment on 5G deployment, dense fiber and small-cells infrastructures are emerging as crucial assets for tower companies and fiber-network managers, like American Tower Corporation (AMT - Free Report) and Uniti.

In the Dec-end quarter too, a solid portfolio of strategic communication assets, including fiber, small cells and macro towers, is expected to have accelerated the company’s activities. In fact, total revenues for the company are estimated to be $266.3 million, indicating 8.1% year-over-year growth.

Notably, inorganic growth on the back of acquisitions is also anticipated to boost its results. In the Oct-Dec quarter, Uniti acquired Information Transport Solutions, Inc., and also closed the previously-announced sale-leaseback and buyout of CableSouth Media, LLC. These acquisitions have strengthened its fiber infrastructure segment and will likely drive segmental revenues, moving ahead. 

Further, the company’s leasing segment is anticipated to have generated stable recurring revenues from its long-term leases.  

However, the company has a concentrated tenant base, with nearly two-third of its pro forma revenues being generated by Windstream Holdings Inc . Hence, unfavorable developments in the customer’s business or loss of any of its customers is expected to have impacted the company’s top line during the quarter.  

Also, Uniti’s activities during the quarter could not gain adequate analyst confidence. In fact, the Zacks Consensus Estimate for fourth-quarter FFO per share remained unchanged at 64 cents, over the past month. In addition, the figure remains flat on a year-over-year basis.

Earnings Whispers

Here is what our quantitative model predicts:

Uniti does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The company’s Earnings ESP is 0.00%.

Zacks Rank: It currently carries a Zacks Rank of 3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of a positive surprise.

Stock That Warrant a Look

Senior Housing Properties Trust (SNH - Free Report) , set to release earnings on Mar 1, has an Earnings ESP of +36.36% and holds a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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