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Crown Castle International Inc. (CCI - Analyst Report) declared fourth-quarter 2011 financial results, which beat the Zacks Consensus Estimates. The solid performance was primarily driven by higher usage of smartphones and increased deployment of 4G networks.

Net profit

Quarterly GAAP net income was approximately $43.9 million or 16 cents per share compared with a net income of $35.7 million or 12 cents per share in the year-ago quarter. Fourth-quarter 2011 adjusted EPS of 18 cents was a penny above the Zacks Consensus Estimate.

Revenue

Net revenue in the reported quarter was $519.5 million, up 4.7% year over year, just exceeding the Zacks Consensus Estimate of $518 million. This was mainly due to improved performance by the Site Rental segment.

Margins

Gross margin in the reported quarter was 71.3% compared with 69.2% in the year-ago quarter. Operating income was $176.9 million compared with $156.2 million in the prior-year quarter. Quarterly adjusted EBITDA was approximately $335.2 million, up 7.6% year over year. Recurring cash flow (adjusted EBITDA excluding interest expense and sustaining capital expenditure) in the fourth quarter of 2011 was roughly $198.7 million, up 13.1% year over year.

Cash Flow

During fiscal 2011, funds flow from operation (FFO) was $708.3 million compared with $182.2 million in fiscal 2010. FFO per share in fiscal 2011 was $2.48 compared with 63 cents in fiscal 2010. Adjusted funds flow from operation (AFFO) during fiscal 2011 was $736 .7 million compared with $631.2 million in fiscal 2010. AFFO per share in fiscal 2011 was $2.58 compared with $2.20 in fiscal 2010.

Balance Sheet

At the end of fiscal 2011, Crown Castle had cash & marketable securities of approximately $80.1 million on its balance sheet compared with $112.5 million at the end of fiscal 2010. Total debt was approximately $6,958.3 million at the end of the reported quarter versus $6,750.2 million at the end of fiscal 2010. At the end of fiscal 2011, debt-to-capitalization ratio was 0.74 versus 0.73 at the end of fiscal 2010.

Site Rental Segment

Quarterly revenue was $471.3 million, up 5.4% year over year. Gross margin (site rental revenue excluding site rental cost of operations) for the segment was 74.5% compared with 72.8% in the prior-year quarter.

Network Services Segment

Quarterly revenue was $48.1 million, down 2% year over year. Gross margin for the segment was 40.2% compared with 36.4% in the prior-year quarter.

Management Outlook for the first Quarter of Fiscal 2011

CrownCastleexpects site rental revenue in the range of $474 million to $479 million. Site rental cost of operation is projected in the $117 million to $122 million range. Adjusted EBITDA is anticipated between $335 million and $340 million. Interest expense is estimated in the $124 million to $128 million range. FFO is estimated in the range of $172 million to $198 million and AFFO is estimated between $193 million and $198 million. Net income, on a GAAP basis, after deducting dividend on preferred stocks, is expected in the range of $34 million to $60 million or 12 cents to 21 cents per share.

Management Outlook for Fiscal 2012

CrownCastleexpects site rental revenue in the range of $1,930 million to $1,945 million. Site rental cost of operation is projected in the $470 million to $485 million range. Adjusted EBITDA is anticipated between $1,365 million and $1,380 million. Interest expense is estimated in the $505 million to $515 million range. FFO is estimated in the range of $727 million to $817 million and AFFO is estimated between $800 million and $820 million. Net income, on a GAAP basis, after deducting dividend on preferred stocks, is expected in the range of $171 million to $261 million or 59 cents to 90 cents per share.

Recommendation

Strong financial outlook and continuous share repurchase coupled with increased roll outs of 3G/4G high speed mobile voice, data, and video technology and higher smartphone usage will act as positive catalysts for the stock, going forward. The company is well positioned compared with its peers, such as AmericanTower Corp. (AMT - Analyst Report) and SBA Communications Corp. (SBAC - Snapshot Report).

We, thus, maintain our long-term Outperform recommendation onCrown Castle. Currently, CrownCastleholds a Zacks#1 Rank, implying a short-term Strong Buy rating.

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