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Crown Castle (CCI) Beats on Q3 FFO & Revenues, Issues '19 View

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Crown Castle International Corp.’s CCI third-quarter 2018 adjusted funds from operations (AFFO) per share of $1.39 compares favorably with the prior-year figure of $1.15. The Zacks Consensus Estimate for the reported quarter’s AFFO per share was pegged at $1.38.

Results reflect increase in site rental revenues. Also, the company raised its outlook for 2018 and provided guidance for 2019.

Net revenues for the third quarter amounted to $1.37 billion and marked year-over-year growth of 29.3%. Moreover, the reported figure came in line with the Zacks Consensus Estimate of $1.35 billion.

Site rental revenues came in at $1,184 million, up 33% year over year, which included organic growth, as well as contributions from acquisitions and other items. Particularly, site rental revenues in the Jul-Sep quarter recorded 5.8% growth, driven by strong new leasing activity, as well as contracted tenant escalations.

Further, network service revenues came in at $191 million, up 12.3% year over year.

Operating Metrics

Quarterly operating income jumped 37.5% from the prior-year quarter to $359 million. Operating expenses also escalated 26.7% year over year to $1,016 million. Quarterly adjusted EBITDA was approximately $793 million, representing year-over-year increase of 31%.

Cash Flow and Liquidity

Crown Castle exited the third quarter with cash and cash equivalents of $323 million, down from $314 million reported at the end of 2017. Further, as of Sep 30, 2018, the company generated around $1.8 billion of net cash from operating activities compared with $1.4 million reported in the year-ago period.

Also, debt and other long-term obligations aggregated approximately $16,313 million, up from $16,044 million at the end of 2017.

Dividend Payout

During the Sep-end quarter, Crown Castle paid common stock dividend of $1.05 per common share, up approximately 11% from the year-earlier quarter.

Q4 Outlook

For fourth-quarter 2018, Crown Castle expects site rental revenues of $1,189-$1,199 million. Site Rental cost of operation is projected at $345-$353 million. Adjusted EBITDA is estimated in the range of $820-$830 million. Interest expense (inclusive of amortization) is projected at $160-$170 million. Meanwhile, FFO is anticipated in the $567-$577 million band, while AFFO is projected at $591-$601 million.

2018 Outlook

Crown Castle raised its outlook for full-year 2018. The company expects site rental revenues of $4,696-$4,706 million, denoting a projected increase of $13 million at the mid-point from the previously-issued outlook. Adjusted EBITDA is anticipated in the band of $3,144-$3,154 million, reflecting an uptick of $2 million at the mid-point. In addition, AFFO is guided in the band of $2,273-$2,283 million, unchanged at the mid-point.

2019 Outlook

The company also provided its outlook for 2019. For full-year 2019, Crown Castle expects site rental revenues of $4,898-$4,943million. Site Rental cost of operation is projected at $1,438-$1,483 million. Adjusted EBITDA is estimated in the range of $3,303-$3,348 million. Meanwhile, FFO is anticipated in the $2,252-$2,297 million band, while AFFO is projected at $2,413-$2,458 million.

Our Take

Per management, strong leasing activity has enabled the company to increase its annualized common stock dividend. The company has made immense efforts to build an unmatched portfolio of more than 40,000 towers and 65,000 route miles of high-capacity fiber in key U.S. markets. This has also enabled the company to enjoy long-term demand from its customers. Furthermore, continued growth in the company’s towers and fiber segments amid its solid capacity to offer tower, small cells and fiber solutions bode well.

Nevertheless, escalating expenses and cut-throat competition in the wireless tower operator industry remain concerns for Crown Castle.

Crown Castle International Corporation Price, Consensus and EPS Surprise
 

Crown Castle International Corporation Price, Consensus and EPS Surprise | Crown Castle International Corporation Quote

Crown Castle currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Duke Realty Corporation DRE, Cousins Properties CUZ and Simon Property Group SPG. Simon Property and Cousins Properties are slated to report third-quarter earnings on Oct 25, while Duke Realty is scheduled to release its Q3 numbers on Oct 24.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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