It has been about a month since the last earnings report for Crown Castle (CCI). Shares have added about 3.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Crown Castle due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Crown Castle Beats on Q3 FFO & Revenues, Issues '19 View
Crown Castle’s third-quarter 2018 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.
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.
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.
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.
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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Crown Castle has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Crown Castle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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