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What's in Store for American Tower (AMT) This Earnings Season?

American Tower Corporation AMT is scheduled to release fourth-quarter and full-year 2023 results on Feb 27 before the opening bell. While the quarterly results are expected to reflect year-over-year growth in revenues, funds from operations (FFO) per share might exhibit a decline.

In the last quarter, American Tower reported an adjusted FFO per share of $2.58, beating the consensus mark by 9.79%. The quarterly results reflected better-than-anticipated revenues, aided by improving revenues across its Property segment. American Tower recorded healthy year-over-year organic tenant billings growth of 6.3% and total tenant billings growth of 7.3%.

Over the preceding four quarters, the company topped adjusted FFO per share estimates on all occasions, the average beat being 6.42%. The graph below depicts this surprise history:

American Tower Corporation Price and EPS Surprise

American Tower Corporation Price and EPS Surprise
American Tower Corporation Price and EPS Surprise

American Tower Corporation price-eps-surprise | American Tower Corporation Quote

Factors to Note

American Tower is poised to benefit from its extensive and geographically diversified communication real estate portfolio. The high capital spending by wireless carriers amid growing wireless penetration, accelerated 5G network deployment efforts and spectrum auctions is likely to have kept demand up in the fourth quarter. Long-term leases with its tenants assure stable cash flows.

The company’s continued efforts toward macro-tower investments to expand its global footprint and address the demand in these markets bode well for long-term growth.
Also, with hybrid IT and multi-cloud access becoming more relevant for continued digital transformation across all workloads, customers are outsourcing to CoreSite’s (an American Tower subsidiary) diverse ecosystem of highly interconnected data center facilities and critical cloud on-ramps.

American Tower is anticipated to have carried on with its macro-tower investments during the quarter, backed by a robust balance sheet position.

Nonetheless, higher interest expenses are likely to have impaired AMT’s performance to some extent during the quarter. Also, elevated churn in certain markets where the company operates may have been a spoilsport.

Projections

The Zacks Consensus Estimate for quarterly revenues is pegged at $2.73 billion, indicating a rise of 1.03% from the year-ago period’s reported figure.

The consensus estimate for operating revenues from the Property segment is pegged at $2.69 billion, indicating growth from $2.64 billion reported in the year-ago period. The consensus mark for operating revenues from the Data Centers is currently pegged at $213.5 million, up from $198.0 million in the year-ago period.

However, operating revenues from the Service segment are expected to be on the lower side in the to-be-reported quarter. The Zacks Consensus Estimate stands at $25.32 million, suggesting a fall from $60 million reported in the prior-year quarter.

American Tower’s activities during the soon-to-be-reported quarter were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for quarterly AFFO per share has been unrevised at $2.18 over the past month. The figure also suggests a decline of 6.84% from the year-ago quarter’s reported figure.

For 2023, American Tower anticipated total property revenues in the range of $10,895 -$10,985 million, suggesting a year-over-year improvement of 4.5% at the midpoint, and adjusted EBITDA of $7,010-$7,090 million, calling for a midpoint increase of 6.1%. AMT projected AFFO attributable to AMT common stockholders in the band of $4,540-$4,600 million, implying 1.2% year-over-year growth at the midpoint, and AFFO per share in the range of $9.72-$ 9.85, indicating a marginal rise at the midpoint of 0.3%.

For the full year, the Zacks Consensus Estimate for AFFO per share is pegged at $9.79. The figure indicates a 0.31% increase year over year on 3.53% year-over-year growth in revenues to $11.09 billion.

Here Is What Our Quantitative Model Predicts:

Our proven model does not conclusively predict a surprise in terms of FFO per share for American Tower this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an FFO beat. However, that’s not the case here.

American Tower currently carries a Zacks Rank of 2 and has an Earnings ESP of -8.59%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are two stocks from the broader REIT sector — Extra Space Storage Inc. EXR and Park Hotels & Resorts Inc. PK — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.

Extra Space Storage, scheduled to report quarterly numbers on Feb 27, has an Earnings ESP of +0.70% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Park Hotels & Resorts, slated to release quarterly numbers on Feb 27, has an Earnings ESP of +1.31% and carries a Zacks Rank of 3 at present.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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

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