Crown Castle Beats Earnings, Rev
Crown Castle International Corporation (CCI) reported second-quarter 2013 adjusted earnings per share of 18 cents beating the Zacks Consensus Estimate of 16 cents.
Net profit
Quarterly GAAP net income was approximately $52.4 million or 18 cents per share compared with a profit of $116.0 million or 40 cents per share in the year-ago quarter.
Revenues
Net revenue in the quarter increased 25.6% year over year to $734.9 million, surpassing the Zacks Consensus Estimate of $721 million. This was mainly due to improved performance by both the Site Rental and the Network Services segments.
Margins
Gross margin in the second quarter was 66.1% compared with 70.7% in the year-ago quarter. Operating income was $230.0 million compared with $203.0 million in the prior-year quarter. Quarterly adjusted EBITDA was approximately $444.4 million, representing a year-over-year increase of 17.4%.
Cash Flow
During the second quarter of 2013, funds flow from operations (:FFO) was $276.2 million compared with $195.3 million in the prior-year quarter. FFO per share in the reported quarter was 94 cents compared with 67 cents in the year-ago quarter. Quarterly adjusted funds flow from operations (:AFFO) was $303.9 million compared with $214.8 million in the previous quarter. AFFO per share in the reported quarter was $1.04 compared with 74 cents in the year-ago quarter. During the second quarter of 2013, Crown Castle bought 1.1 million common shares for $75.0 million at an average price of $70 per share.
Balance Sheet
At the end of the second quarter of 2013, Crown Castle had cash & marketable securities of approximately $126.9 million on its balance sheet compared with $441.4 million at the end of 2012. Total debt was approximately $10,691.5 million at the end of the reported quarter versus $10,923.2 million at the end of 2012. At the end of the second quarter of 2013, the debt-to-capitalization ratio was 0.786 versus 0.788 at the end of 2012.
Site Rental Segment
Quarterly revenues were $616.8 million, up 19.2% year over year. Gross margin for the segment was 71.0% compared with 74.6% in the prior-year quarter.
Network Services Segment
Quarterly revenues were $118.1 million, up by a massive 73.8% year over year. Gross margin for the segment was 40.6% compared with 40.7% in the prior-year quarter.
Management Outlook for the Third Quarter of 2013
Crown Castle expects Site Rental revenues of $617 million to $622 million. Site Rental cost of operation is projected in the band of $179 million to $184 million. Adjusted EBITDA is anticipated between $436 million and $441 million. Site Rental gross margin is expected between $437 and $442 million. Interest expense (inclusive of amortization) is estimated in the $138 million - $143 million range. FFO is estimated in the range of $270 million to $275 million. AFFO is estimated in the $299 million - $304 million range. Net income is expected in the range of $28 million to $68 million or 10 cents to 23 cents per share.
Management Outlook for 2013
Crown Castle expects Site Rental revenues of $2,471 million to $2,481 million. Site Rental cost of operation is projected in the $711 million to $721 million range. Site Rental gross margin is expected between $1,755 to 1,765 million. Adjusted EBITDA is anticipated between $1,750 million and $1,760 million. Interest expense (inclusive of amortization) is estimated in the $581 million to $591 million range. FFO is estimated in the range of $1,022 million to $1,032 million. AFFO is expected in the $1,187 million to $1,197 million range. Net income is expected to be between $116 million and $212 million or 40 cents to 73 cents per share.
Other Stocks to Consider
Currently, Crown Castle has a Zacks Rank #4 (Sell). Other stocks in the wireless tower industry include American Tower Corp. (AMT), SBA Communications Corp. (SBAC) and Equinix Inc. (EQIX). All the stocks currently carry a Zacks Rank #3 (Hold).
Our Take
Despite a highly leveraged balance sheet, we believe that a strong financial outlook, continuous acquisitions and huge demand for network due to increased usage of smartphones will act as tailwinds for the company, going forward. Moreover, network densification by carriers to enhance network quality and capacity bodes well for the company.
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