Shares of Crown Castle International Corp CCI have been performing well, of late. In the past six months, the stock has rallied 9.1%, outperforming the industry’s growth of 4.7%.
This rally is anticipated to continue in the near term supported by a number of favorable factors.
Crown Castle has been making diligent efforts to expand its fiber footprint (focused on the small cell opportunity) through the purchase of several fiber operators and small-cell deployments. This has provided the company with competitive small-cell economics. Additionally, with strategic acquisitions, it is well poised to service requirements of the largest carriers for macro tower, including the current 4G and future 5G deployments as well as enterprise demand for fiber.
Moreover, in third-quarter 2019, Crown Castle reported adjusted funds from operations (AFFO) per share of $1.55 that surpassed the Zacks Consensus Estimate of $1.48. Further, net revenues amounted to $1.51 billion, suggesting 10.1% year-over-year growth. Results reflected benefits from the company’s extensive tower portfolio, high demand for infrastructure and healthy leasing activity.
If you haven’t taken advantage of the share price appreciation yet, the time is right for you to bet on the stock, as it is poised to ride on its growth trajectory.
Key Driving Factors
Secular industry tailwinds to drive new leasing activity: As data volume for wireless and wired network is growing rapidly, service providers continue to invest more in their networks in a bid to improve and densify the networks. Further, 5G deployment is spurring demand for the company’s tower and small cell assets as the wireless carriers intend to expand and enhance their networks, in order to provide the coverage, capacity and speed needed to support mobile video, the Internet of Things (IoT), fixed wireless broadband. Amid this, Crown Castle’s customers are leasing its tower and fiber assets, along with adding new cell sites and spectrum. In fact, it expects new leasing activity to be in the $345-$375 million range for 2019 and $365-$395 million for 2020.
Robust FFO growth: The company’s FFO per share is estimated to grow 8.9% year over year in the ongoing year. Additionally, in the next five years, the company’s FFO per share is estimated to be up 15.5%. Moreover, Crown Castle projects the FFO in the $2,539-$2,584 million range, backed by robust demand for its tower and fiber assets.
Superior return on equity (ROE): Crown Castle has a ROE of 8.07%, significantly higher than the industry’s average of 4.54%. This highlights optimal utilization of equity and boosts investors’ confidence in the stock.
Strong cash flow per share: The company generates cash flow per share of $5.32 as compared with the industry’s average of $2.26. Further, its cash flow is expected to improve 30% year over year in 2019 (compared with the industry’s growth of 13.2%). This makes us optimistic about Crown Castle’s operating performance in the upcoming period.
The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Stocks to Consider
Duke Realty Corporation DRE currently carries a Zacks Rank of 2. The Zacks Consensus Estimate for the ongoing year’s FFO per share has remained unchanged at $1.43 over the past month.
Healthcare Realty Trust Incorporated HR holds a Zacks Rank of 2, at present. The company’s FFO per share estimate for 2019 moved 1.2% north to $1.60 over the past 30 days.
EastGroup Properties, Inc. EGP also carries a Zacks Rank of 2, currently. The company’s FFO per share estimate for this year moved up to $4.94 over the past month.
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