Back to top

Analyst Blog

Zacks Equity Research

Crown Castle Misses, Raises Outlook

CCI AMT

 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Crown Castle International Inc.’s (CCI - Analyst Report) third-quarter 2012 earnings per share of 14 cents missed the Zacks Consensus Estimate by a penny. The company also raised its fiscal 2012 financial guidance mainly based on the upgrading of LTE networks from all four major carriers in the U.S.

Net profit

Quarterly GAAP net income was approximately $42 million or 14 cents per share compared with $51.3 million or 15 cents per share in the year-ago quarter.

Revenue

Net revenue in the quarter increased 21% year over year to $621.3 million, surpassing the Zacks Consensus Estimate of $598 million. This was mainly due to improved performance by the Site Rental segment.

Margins

Gross margin in the third quarter was 70.2% compared with 71.4% in the year-ago quarter. Operating income was $220.8 million compared with $181.9 million in the prior-year quarter. Quarterly adjusted EBITDA was approximately $400.2 million, representing a year-over-year upside of 20.4%.

Cash Flow

During the third quarter of 2012, funds flow from operation (FFO) was $221.3 million compared with $186.5 million in the prior-year quarter. FFO per share in the reported quarter was 76 cents compared with 66 cents in the year-ago quarter.

Quarterly adjusted funds flow from operations (AFFO) was $229.9 million compared with $188.1 million in the previous quarter. AFFO per share in the reported quarter was 79 cents compared with 66 cents in the year-ago quarter.

Balance Sheet

At the end of the third quarter of 2012, Crown Castle had cash & marketable securities of approximately $118.9 million on its balance sheet compared with $80.1 million at the end of 2011. Total debt was approximately $8,295.1 million at the end of the reported quarter versus $6,853.2 million at the end of 2011. At the end of the reported quarter, debt-to-capitalization ratio was 0.74 versus 0.74 at the end of 2011.

Site Rental Segment

Quarterly revenue was $538.8 million, up 14.9% year over year. Gross margin for the segment was 74.9% compared with 74% in the prior-year quarter.

Network Services Segment

Quarterly revenue was $82.6 million, up 83.6% year over year. Gross margin for the segment was 39.4% compared with 44.2% in the prior-year quarter.

T-MobileUSA Towertransaction

CrownCastle and T-Mobile USA, a unit of Deutsche Telecom AG entered into a definitive agreement through which Crown Castle will acquire the exclusive right to lease and operate approximately 7,200 wireless towers of T-Mobile USA for a weighted average term of nearly 28 years. As part of the deal, Crown Castle has the option of buying 7200 towers at the end of the lease period for another $2.4 billion.

In October 2012, Crown Castle has issued senior notes worth $1.65 billion to part finance the T-Mobile tower deal with the balance being funded from the available cash in hand and funds from its revolving credit facility. The deal is expected to be closed in the fourth quarter of 2012, subject to customary regulatory approval and will make it the largest tower company in the U.S., surpassing American Tower Corporation (AMT - Analyst Report).

Management Outlook for the Fourth Quarter of 2012

CrownCastleexpects site rental revenue in the range of $538 million to $543 million. Site rental cost of operation is projected in the band of $127 million to $132 million. Adjusted EBITDA is anticipated between $398 million and $403 million. Site rental gross margin is anticipated to be between $408 and $413 million.

Interest expense (inclusive of amortization) is estimated in the $162 million to $167 million range. FFO is estimated in the range of $192 million to $231 million. AFFO is estimated in the $208 million to $213 million range. Net income is expected in the range of $15 million to $50 million or 5 cents to 17 cents per share.

Management Outlook for 2012

CrownCastleexpects site rental revenue to be in the range of $2,092 million to $2,097 million. Site rental cost of operation is projected in the $517 million to $522 million range. Site rental gross margin is expected between $1,573 to 1,578 million.  Adjusted EBITDA is anticipated between $1,536 million and $1,541 million.

Interest expense (inclusive of amortization) is estimated in the $590 million to $595 million range. FFO is estimated in the range of $797 million to $836 million. AFFO is estimated in the $850 million to $855 million range. Net income is expected to be between $220 million and $264 million or 75 cents to 90 cents per share.

Management Outlook for 2013

CrownCastleexpects site rental revenue to be in the range of $2,185 million to $2,200 million. Site rental cost of operation is projected in the $535 million to $550 million range. Site rental gross margin is expected between $1,640 to 1,655 million. 

Adjusted EBITDA is anticipated between $1,595 million and $1,610 million. Interest expense (inclusive of amortization) is estimated in the $665 million to $675 million range. FFO is estimated in the range of $790 million to $830 million. AFFO is estimated in the $878 million to $893 million range. Net income is expected to be between $71 million and $180 million or 24 cents to 62 cents per share.

Recommendation

We believe that strong financial outlook, continuous acquisition and huge demand for network due to increased usage of smartphones will act as tailwinds for the company going forward.

We, thus, maintain our long-term Outperform recommendation on Crown Castle. However, the company currently retains a Zacks #3 Rank, implying a short-term Hold rating.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
BITAUTO HOLD BITA 35.33 +14.82%
ANI PHARMACE ANIP 24.79 +14.66%
E HOUSECHINA EJ 10.99 +9.24%
CANADIAN SOL CSIQ 26.97 +7.15%
INTERNATIONA ICAGY 33.30 +5.38%