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Crown Castle (CCI) Misses Q4 FFO Estimates, Raises '19 View

Zacks Equity Research

Crown Castle International Corp.’s CCI fourth-quarter 2018 adjusted funds from operations (AFFO) per share of $1.42 compares favorably with the prior-year figure of $1.25. However, the figure missed the Zacks Consensus Estimate which was pegged at $1.44.

The year-over-year increase reflects growth in site rental revenues. Also, the company has raised its outlook for 2019.

Net revenues for the fourth quarter amounted to $1.42 billion and marked 14.6% year-over-year growth. Moreover, the reported figure comes in marginally ahead of the Zacks Consensus Estimate of $1.40 billion.

Site rental revenues came in at $1,209 million, up 15% year over year, which included organic growth, as well as contributions from acquisitions and other items. Particularly, site rental revenues in the Oct-Dec quarter recorded 5.6% organic growth, driven by strong new leasing activity, as well as contracted tenant escalations. Further, services and other revenues came in at $210 million, up 12.3% year over year.

For full-year 2018, the company’s adjusted FFO per share came in at $5.48, up 12.8% year over year. This was achieved on 24.5% year-over-year growth in revenues to $5.4 billion.

Operating Metrics

Quarterly operating income jumped 40.9% from the prior-year quarter to $379 million. However, operating expenses escalated 7.3% year over year to $1,040 million. Quarterly adjusted EBITDA was approximately $816 million, representing year-over-year increase of 15%.

Cash Flow and Liquidity

Crown Castle exited 2018 with cash and cash equivalents of $277 million, down from $314 million reported at the end of 2017. Furthermore, as of Dec 31, 2018, the company generated around $2.5 billion of net cash from operating activities compared with $2.0 billion reported in the year-ago period.

Also, debt and other long-term obligations aggregated approximately $16,575 million, up from $16,044 million at the end of 2017.

Dividend Payout

During the Dec-end quarter, Crown Castle paid common stock dividend of $1.125 per common share, up approximately 7% from the year-earlier quarter.

2019 Outlook

Crown Castle has raised its outlook for full-year 2019. The company expects site rental revenues of $4,939-$4,984 million, denoting a projected increase of $41 million at the mid-point from the previously-issued outlook. Adjusted EBITDA is anticipated in the band of $3,344-$3,389 million, reflecting an uptick of $41 million at the mid-point.

Meanwhile, FFO is anticipated in the $2,293-$2,338 million band, while AFFO is projected at $2,413-$2,458.

Our Take

Crown Castle continues to benefit from its extensive tower portfolio, high demand for infrastructure and healthy leasing activity. 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. 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. Also, deployment of 5G network will drive wireless carriers to expand and enhance their networks. This will foster growth for the company’s tower and small-cell assets in the future.

Nevertheless, escalating expenses and cut-throat competition in the wireless tower operator industry remain concerns for Crown Castle. In addition, consolidation in the wireless industry might reduce demand for cell-tower deployments and is likely to impact its top line.

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.

Crown Castle International Corporation Price, Consensus and EPS Surprise

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

We now look forward to the earnings releases of other REITs like Equity Residential EQR, Boston Properties, Inc. BXP and Duke Realty Corporation DRE. While Equity Residential and Boston Properties both have their earnings releases scheduled for Jan 29, Duke Realty is slated to report fourth-quarter numbers on Jan 30.

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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