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American Tower Corp. (NYSE:AMT) is slated to release its second quarter 2011 results on Tuesday, August 2, before the opening bell. The current Zacks Consensus Estimate for the second quarter is pegged at 23 cents per share, representing an annualized negative growth of 9.07%.

With respect to earnings surprise, over the trailing four quarters, AMT has outperformed the Zacks Consensus Estimate in all the three quarters except one quarter, where the company failed to surpass the Zacks Consensus Estimate. Over the last four quarters, the average earnings surprise was a positive 11.82%.

First Quarter Recap

On May 3 2011, AMT declared its first quarter 2011 financial results outpacing the Zacks Consensus Estimates. On a GAAP basis, net income in the first quarter of 2011 was $91.8 million or 23 cents per share compared with a net income of $96.3 million or 24 cents per share in the prior-year quarter. However, quarterly EPS of 23 cents missed the Zacks Consensus Estimate by a penny.

Agreement of Estimate Revisions

In the last 30 days, out of the 15 analysts covering the stock, only 1 analyst increased the EPS estimate for second quarter 2011 while none decreased their estimates. Similarly, for the third quarter of 2011, out of the 14 analysts covering the stock, 1 analyst increased the EPS estimate while none moved in the opposite direction.

For both fiscal 2011and 2012, in the last 30 days, out of the 15 analysts covering the stock, 2 analysts increased their EPS estimates but none decreased their estimates.

Magnitude of Estimate Revisions

Relative to these upward revisions of estimates, during the last 30 days, the Zacks Consensus Estimate remained flat with the current estimate of 23 cents per share for the second quarter of 2011, while for the third quarter of 2011; the Zacks Consensus Estimate was a penny short of the current estimate of 25 cents. Likewise, for fiscal 2011, the Zacks Consensus Estimate was just a penny shy of the Zacks Consensus Estimate of 96 cents, while for fiscal 2012, the Zacks Consensus Estimate was flat with the current estimate of $1.31 per share.

Earning Surprises

AMT delivered continuous earnings surprises with an average of 11.82%, which was above the Zacks Consensus Estimates. The current Zacks Consensus Estimates for the ongoing quarter contains 4.35% upside potential while for the upcoming quarter, it is reflecting a 4.55% downside potential (essentially a proxy for future earning surprises). For fiscal 2011, the Zacks Consensus Estimates’ upside potential is 15.00% and for fiscal 2012, the upside potential is 25.00%.

Our Recommendation

American Tower 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. Moreover, competition from other players like Crown Castle International Corp. (NYSE:CCI) and NORTEL NETWORKS will act as negative catalyst for the stock.

However, solid first quarter 2011 financial results coupled with solid demand for broadband data services due to increased usage of smartphones and higher deployments of 3G/4G networks will drive solid demand going forward.

We, thus, maintain our long-term Neutral recommendation forAmerican Tower. Currently, American Tower has a Zacks #3 Rank, implying a short-term Hold rating.

Source: American Tower: Earnings Preview