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Crown Castle (CCI) Q2 FFO & Revenues Trump Estimates, View Up

Zacks Equity Research

Crown Castle International Corp. CCI reported second-quarter 2019 adjusted funds from operations (AFFO) per share of $1.48, up from the prior-year figure of $1.31. Further, the reported figure surpassed the Zacks Consensus Estimate of $1.43.

Results reflect benefits from the company’s extensive tower portfolio, high demand for infrastructure and healthy leasing activity. The year-over-year increase in the bottom line reflects growth in site-rental revenues.

Net revenues for the reported quarter amounted to $1.48 billion, suggesting 11.1% year-over-year growth. Moreover, the reported figure outpaced the Zacks Consensus Estimate of $1.43 billion.

Site-rental revenues came in at $1,238 million, up 6% year over year, which included organic growth, as well as contributions from straight-lined revenues. Particularly, site-rental revenues during the April-June quarter recorded 5.7% organic growth, driven by strong new leasing activity, as well as contracted tenant escalations.

Operating Metrics

Quarterly operating income increased around 21.4% from the prior-year quarter to $419 million. However, operating expenses flared up 7.5% year over year to nearly $1.06 billion. Quarterly adjusted EBITDA was approximately $857 million, representing year-over-year jump of 11%.

Cash Flow and Liquidity

Crown Castle exited second-quarter 2019 with cash and cash equivalents of $288 million, up from the $277 million reported at the end of 2018. Furthermore, as of Jun 30, 2019, the company generated around $1.2 billion of net cash from operating activities compared with $1.1 billion reported in the year-ago period.

Also, debt and other long-term obligations aggregated approximately $17.5 billion, up from $16.6 million witnessed at the end of 2018.

Dividend Payout

During the June-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 $4,950 million to $4,980 million up from $4,939 million-$4,984 million provided earlier. Adjusted EBITDA is projected at $3,393 million-$3,423 million up from the $3,344 million-$3,389 million estimated earlier.

Meanwhile, FFO is anticipated in the $2,363-$2,393 million range (previously $2,293 million-$2,338 million). Also, AFFO is projected at $2,464-$2,494 million as compared with the previously-issued guidance of $2,413-$2,458 million.

Our Take

Notably, in a bid to improve and densify their networks, Crown Castle’s customers are leasing its tower and fiber assets, along with adding new cell sites and spectrum. Hence, the company has been focusing on diversifying its business from a tower operator to a fiber provider. This also helped the company witness high tower leasing activity during the reported quarter. Further, higher operating income in the second quarter is encouraging.

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Crown Castle currently carries 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 Cousins Properties Incorporated CUZ, Iron Mountain Incorporated IRM and PS Business Parks PSB slated to report their quarterly numbers on Jul 24, Aug 1 and Jul 23, respectively.

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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