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What’s Expected to Drive American Tower’s Q2 2018 Earnings

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Second-quarter expectations

American Tower (AMT) is slated to release its second-quarter 2018 results on July 31. Analysts expect its AFFO (adjusted funds from operations) to rise 10.1% YoY (year-over-year) to $1.74 per share.

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Major drivers

Domestic cellular operators’ faster 5G (fifth-generation) network deployment and American Tower’s global expansion initiatives are expected to drive its top line in the second quarter, and tax reform is expected to boost its AFFO. In the first quarter, American Tower saw an income tax benefit of $31.1 million due to the newly implemented tax cut.

However, some consolidation in the Indian cellular market may impact the company’s overall performance. In its last earnings conference call, American Tower stated that some Indian cellular operators, namely Airtel and Telenor, and Vodafone India and Idea, are in the process of merging their operations, while some, such as Aircel, have exited the marketplace. This consolidation slightly impacted American Tower’s churn rate in the Indian market and its first-quarter performance.

Furthermore, rising interest rates may drag down the company’s second-quarter bottom line. The Fed raised interest rates twice in the first half of 2018, by 25 basis points each time, and has projected for two more hikes this year. To remain competitive, American Tower has to continuously invest in infrastructure build-outs and communication sites buyouts, for which it must rely on debt. The company’s net debt grew 4% YoY in the first quarter.

First-quarter performance

American Tower started 2018 on a solid note, with its AFFO rising 11.5% YoY to $1.73 per share in the first quarter, beating estimates by 3%. Close peers Realty Income (O), Verizon Communications (VZ), Crown Castle International (CCI), and SBA Communications (SBAC) are anticipated to report AFFO of $0.79, $1.15, $1.27, and $0.19 per share, respectively, in the second quarter. American Tower comprises ~4.8% of the ProShares Ultra Real Estate ETF (URE). In this series, we’ll look at American Tower’s earnings, shareholder payouts, strategic investments, expectations, and valuation.

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