American Tower Corp (NYSE:AMT) is getting dialed in to report its fourth-quarter results on Tuesday morning. The wireless and broadcast communications real estate owner is expected to report another strong quarter as it continues to add new towers to its portfolio. Here are a few things to keep an eye on when the company reports earnings.
First, let's review
Last quarter, American Tower reported what some would consider a mixed quarter. The company's earnings of $0.50 per share were about $0.07 per share lighter than what Wall Street was expecting, though the company did beat on revenue. However, as a real estate investment trust, or REIT, earnings per share really aren't the right metric to look at. Instead, adjusted cash flow from operations, or AFFO, is the better metric, and that was up 25.2% from the prior year's third quarter. That strong growth, coupled with the company's robust outlook, gave it confidence to raise its full-year guidance.
Watch the numbers vs. guidance
American Tower raised its full-year guidance by $10 million on the top line, while bolstering its AFFO by $35 million. This pushed its full-year expectations to total rental and management revenue of about $4 billion, and AFFO of around $1.8 billion.
That puts fourth-quarter revenue expectations at about $1 billion and AFFO at around $427 million. Meanwhile, Wall Street will also keep an eye on earnings, which it expects to come in at $0.51 per share. Ideally, we'd like to see the company hit, or better yet, exceed this guidance. There are, however, two potential catalysts (one good and one bad) that could impact the company's ability to meet its guidance.
Acquisitions could lead to upside
One potential catalyst for an upside surprise is from acquisitions. American Tower expected its BR Towers acquisition to close in the quarter, but it didn't include that in its guidance estimates. The $978 million deal will boost American Tower's revenue by $131 million on an annual basis, as well as being accretive to its AFFO. So, depending on how early in the quarter the deal closed, it could have provided a bit of a boost to the company's results. However, the fact that BR Towers is located in Brazil leads us to a potential downside catalyst to watch.
Currency could pull down results
While its name is American Tower, the company's business is truly international. That's great for growth as it opens up new doors for the company to acquire communications real estate assets around the globe, including Brazil's BR Towers. However, there is a downside to international operations, and that's currency, which could be a headwind in the quarter.
Right now, the U.S. dollar is strong, which has been a drag on the earnings of companies with international operations. This could impact American Tower this quarter, as its international operations are about a third of its revenue. It estimated that the fluctuations in foreign currency exchange rates could negatively impact its revenue by 3.4% and its AFFO by 3.3%, but investors should watch to see if these fluctuations had an even greater impact than the company expected.
American Tower is expected to deliver another solid quarter as it ends the year on a high note. The company could end the year even better than it expected depending on the impact from the timing of closing the BR Towers acquisition. However, there's also some downside risk from foreign currency fluctuations that investors should keep an eye on, which is a risk that comes from growing internationally.
Otherwise, the company is primed to end the year strong with momentum for more strong growth in 2015, as it has several large tower acquisitions in the pipeline that are expected to close this year.
Matt DiLallo owns shares of American Tower and has the following options: long January 2017 $80 calls on American Tower. The Motley Fool recommends American Tower. The Motley Fool owns shares of American Tower and has the following options: long January 2017 $80 calls on American Tower. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.