American Tower Corp. (AMT) is slated to release its fourth quarter 2010 results on Wednesday, February 23, before the opening bell. The current Zacks Consensus Estimate for the fourth quarter is pegged at 22 cents, representing an annualized growth of 38.67%.
With respect to earnings surprise, over the trailing four quarters, AMT has outperformed the Zacks Consensus Estimate for all the three quarters except one quarter, where the earnings per share (EPS) failed to surpass the Zacks Consensus Estimate.
The average earnings surprise was a positive 15.56%, implying that the company has outdone the Zacks Consensus Estimate by the same magnitude over the last four quarters.
Third-Quarter Performance
On November 5, 2010, AMT declared its third quarter fiscal 2010 financial results that outdid the Zacks Consensus Estimates. On a GAAP basis, third quarter net income was $93.4 million or 23 cents per share compared with a net income of $67.4 million or 17 cents per share in the prior-year quarter. Quarterly EPS of 23 cents was well above the Zacks Consensus Estimate of 20 cents.
Total revenue increased 15.6% year over year to $513.3 million and was above the Zacks Consensus Estimate of $489 million. The solid top-line performance was driven by healthy growth in the company’s Rental and Management business segment.
Agreement of Estimate Revisions
In the last 30 days, out of the 16 analysts covering the stock, only 1 analyst decreased its EPS estimates for the fourth quarter 2010 while none increased it upward. Similarly, for first quarter of fiscal 2011, out of the 11 analysts covering the stock, 1 analyst decreased his or her EPS estimate and none increased it upward.
For fiscal 2010, in the last 30 days, out of the 15 analysts covering the stock, 1 analyst decreased its EPS estimates and none increased it upward. Again, for fiscal 2011, out of the 16 analysts covering the stock, 1 analyst decreased its EPS estimates while none increased it upward.
Magnitude of Estimate Revisions
Relative to these downward revisions of estimates, the Zacks Consensus Estimate was flat, during the last 30 days, for the fourth quarter of 2010 and the first quarter of 2011 at 22 cents and 26 cents, respectively. For fiscal 2010, there was no change in estimates in the last 30 days and the Zacks Consensus Estimate was in line at 94 cents, but for fiscal 2012, the Zacks Consensus Estimate inched up 1 cent from $1.12 to $1.13.
Earning Surprises
AMT delivered continuous earnings surprises for the last three quarters, except for one quarter, with an average of 15.56%, which was above the Zacks Consensus Estimates. The current Zacks Consensus Estimates for the ongoing quarter contains 13.64% downside potential while for the upcoming quarter, it is reflecting a 11.54% upside potential (essentially a proxy for future earning surprises).
Similarly, for fiscal 2011, the Zacks Consensus Estimates’ downside potential is 3.19% and for fiscal 2012, the upside potential is 12.5%.
Our Recommendation
AmericanTower has a huge debt, which may hinder the company’s effort to access the debt market at favorable rates in order to borrow and refinance its expansion plans. Evolution of new technologies may reduce the demand for site leases.
Recent development of satellite-delivered radio and video services may reduce the need for tower-based broadcast transmission. Moreover, competition from other players like Crown Castle International Corp. (CCI) and NORTEL NETWORKS will act as negative catalyst for the stock.
We, thus, maintain our long-term Neutral recommendation for AMT. Currently, it has a Zacks#4 Rank, implying a short-term Sell rating on the stock.
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