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Crown Castle (CCI) Up 7.1% Since Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Crown Castle International Corporation CCI. Shares have added about 7.1% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Crown Castle Q2 Earnings & Revenues Beat Estimates

Crown Castle reported second-quarter 2017 earnings per share of $1.20, beating the Zacks Consensus Estimate of $1.15. Likewise, GAAP net income rose a whopping 49.4% year over year to $112.1 million.

Revenues

Total revenue in the second quarter increased 7.9% year over year to $1,038.3 million, beating the Zacks Consensus Estimate of $1,036 million. Site Rental Segment quarterly revenues were $868.8 million, up 8% year over year. Network Services Segment quarterly revenues were $169.5 million, up 7.4% year over year.

Operating Metrics

Quarterly operating income came in at $258.5 million compared with $231.2 in the year-ago quarter. Total operating expenses rose to $779.8 million from $731.2 million in the year-ago quarter. Operating margin in the reported quarter was 24.9% compared with 24% in the year-ago quarter. Quarterly adjusted EBITDA was approximately $588.5 million, representing a year-over-year increase of 7.1%.

Cash Flow

In the first half of 2017, Crown Castle generated $934.1 million of cash compared with $918.2 million in the year-ago period. Free cash flow, in the reported period was $370.7 million compared with $525.2 million in the year-ago period.

Balance Sheet

At the end of the first half of 2017, Crown Castle had cash and cash equivalents of approximately $199.7 million on its balance sheet compared with $567.6 million at the end of 2016. At second-quarter 2017 end, debt and other long-term obligations totaled approximately $13,841.3 million, up from $12,069.4 million at the end of 2016.

Third-Quarter 2017 Outlook

For the third quarter of 2017, Crown Castle expects Site Rental revenues in the range of $888-$893 million. Site Rental cost of operation is projected in the band of $275-$280 million. Adjusted EBITDA is anticipated between $600 million and $605 million. Interest expense (inclusive of amortization) is estimated at $142–$147 million. Meanwhile, FFO (funds flow from operation) is anticipated in the $404–$409 million band. AFFO (adjusted FFO) is projected in the $447–$452 million range, while net income is projected in the range of $90–$110 million.

Full-Year 2017 Outlook

Crown Castle has raised its outlook for 2017. The company expects Site Rental revenues in the range of $3,504–$3,529 million. Site Rental cost of operation is projected in the $1,071–$1,096 million band. Adjusted EBITDA is anticipated between $2,389 million and $2,414 million. Interest expense (inclusive of amortization) is estimated in the $552–$582 million range. FFO is projected at $1,623 –$1,653 million. AFFO is expected between $1,813 million and $1,838 million. Net income is anticipated between $426 million and $476 million.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 6.3% due to these changes.

Crown Castle International Corporation Price and Consensus

 

Crown Castle International Corporation Price and Consensus | Crown Castle International Corporation Quote

VGM Scores

At this time, Crown Castle's stock has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. Following the exact same course, the stock was allocated also a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for growth based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift.  Notably,the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.


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