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What's in Store for Crown Castle (CCI) This Earnings Season?

Zacks Equity Research

Crown Castle International Corp. CCI is scheduled to release second-quarter 2019 results on Jul 17, after the closing bell. The company’s second-quarter results are expected to reflect year-over-year growth in funds from operations (FFO) per share, as well as revenues.

The Houston-based real estate investment trust (REIT), which is engaged in operation of wireless communication towers in the United States, surpassed the Zacks Consensus Estimate in terms of adjusted funds from operations (AFFO) per share by 1.61% in the last reported quarter. Results reflected benefits from the company’s extensive tower portfolio, high demand for infrastructure and healthy leasing activity.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on two occasions for as many misses. It delivered an average negative surprise of 0.14% during this period. The graph below depicts this surprise history:

Crown Castle International Corporation Price and EPS Surprise

Crown Castle International Corporation Price and EPS Surprise


Crown Castle International Corporation price-eps-surprise | Crown Castle International Corporation Quote

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Crown Castle makes money by leasing out its towers and other communication infrastructure assets, including small-cell nodes to wireless service providers such as AT&T T and Sprint S. These providers then deploy their equipment on towers to support the wireless services. Amid growing demand for data volume and 5G network deployment, wireless carriers are expanding and enhancing their networks.

Further, the company enjoys incremental sales growth by adding new tenants to existing tower infrastructures, in turn, boosting profit margins. In fact, the Zacks Consensus Estimate for second-quarter 2019 site rental revenues will likely marginally improve to $1,232 million, sequentially.

As mobile devices and connections are evolving from lower-generation network connectivity to higher-generation ones, like 4G, LTE and 5G, this is facilitating growth in carrier network investments. This secular growth trend in the cellular tower sector is benefiting tower companies, such as Crown Castle and American Tower Corporation AMT.

Amid this, robust small-cell deployments in 2018 are anticipated to boost the company’s June-end quarter network service revenues from small-cell deployments by 12.5% to $4.5 million.

However, amid favorable industry fundamentals, the company is facing stiff competition from other tower companies. This will likely have impacted Crown Castle’s booking volumes as well as pricing power in the quarter under review. In fact, the Zacks Consensus Estimate for the second-quarter network services revenues from towers is pegged at $190 million, indicating a 6.4% sequential decline.

Further, net revenues from network services and other segment are pinned at $190 million, calling for an 8.2% decline from the March-end quarter’s reported figure.

Moreover, a highly-leveraged balance sheet is another concern for Crown Castle. In addition, as carriers are looking for opportunities to rationalize spending, merger between the company’s major customers is a near-term headwind.

Lastly, prior to the second-quarter earnings release, there is lack of any solid catalyst for becoming overtly optimistic about the company’s business activities and prospects. As such, the Zacks Consensus Estimate of FFO per share for the to-be-reported quarter remained unchanged at $1.43, over the past 30 days.

Earnings Whispers

Our proven model does not conclusively show that Crown Castle’s results will likely beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. Unfortunately, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks to buy or sell before they’re reported with the Earnings ESP Filter.

Earnings ESP: Crown Castle has an Earnings ESP of 0.00%.

Zacks Rank: Crown Castle currently carries a Zacks Rank of 3.

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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