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Crown Castle International Inc. (CCI - Analyst Report) reported its fourth-quarter 2012 adjusted earnings per share of 22 cents topping the Zacks Consensus Estimate of 13 cents per share. The company also raised its financial guidance for fiscal 2013, based on the LTE network upgrade by all four major carriers in the U.S

Net profit

Quarterly GAAP net loss was approximately $19.5 million or 7 cents per share compared to a profit of $43.9 million or 16 cents per share in the year-ago quarter.

Revenue

Net revenue in the quarter increased 29.8% year over year to $674.1 million, surpassing the Zacks Consensus Estimate of $628 million. This upside was mainly due to improved performance by the Site Rental segment.

Margins

Gross margin in the fourth quarter was 67.7% compared with 71.3% in the year-ago quarter. Operating income was $208.7 million compared with $176.8 million in the prior-year quarter. Quarterly adjusted EBITDA was approximately $414 million, representing a year-over-year upside of 23%.

Cash Flow

During the fourth quarter of 2012, funds flow from operation (FFO) was $88.3 million compared with $182.4 million in the prior-year quarter. FFO per share in the reported quarter was 30 cents compared with 64 cents in the year-ago quarter. Quarterly adjusted funds flow from operations (AFFO) was $243 million against $193.1 million in the previous quarter. AFFO per share in the reported quarter was 83 cents compared with 68 cents in the year-ago quarter.

Balance Sheet

At the end of the fourth quarter of 2012, Crown Castle had cash and marketable securities of approximately $441.4 million on its balance sheet compared with $80.1 million at the end of 2011. Total debt was approximately $10,923.2 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 0.79 versus 0.74 at the end of 2011.

Site Rental Segment

Quarterly revenue was $570.3 million, up 21% year over year. Gross margin for the segment was 73.8% compared with 74.5% in the prior-year quarter.

Network Services Segment

Quarterly revenue was $103.8 million, up 115.8% year over year. Gross margin for the segment was 34.6% compared with 40.1% in the prior-year quarter.

Management Outlook for the First Quarter of 2013

Crown Castle expects site rental revenue to be in the range of $605 million to $610 million. Site rental cost of operation is projected in the band of $172 million to $177 million. Adjusted EBITDA is anticipated between $423 million and $428 million. Site rental gross margin is anticipated to be between $430 and $435 million. Interest expense (inclusive of amortization) is estimated to be in the $161 million to $166 million range. FFO is estimated to be in the range of $195 million to $200 million. AFFO is estimated to be in the $259 million to $264 million range. Net income is expected in the range of a loss of $17 million to a profit of $50 million or a loss of 6 cents to a profit of 8 cents per share.

Management Outlook for 2013

Meanwhile, for 2013, Crown Castle expects site rental revenue to be in the range of $2,444 million to $2,459 million. Site rental cost of operation is projected in the $701 million to $716 million range. Site rental gross margin is expected between $1,733 and 1,748 million.  Adjusted EBITDA is anticipated between $1,691 million and $1,706 million. Interest expense (inclusive of amortization) is estimated to be in the $598 million to $608 million range. FFO is estimated to be in the range of $928 million to $943 million. AFFO is estimated in the $1,067 million to $1,082 million range. Net income is expected to be between $58 million and $159 million or 20 cents and 54 cents per share.

Other Stocks Set for Earnings Release

Some other companies belonging to the same industry were about to release their financial results in the upcoming days are American Tower Corporation (AMT - Analyst Report), which is yet to release its fourth quarter results, SBA Communications Corp. (SBAC - Snapshot Report), which will release its fourth quarter results on Feb 18 and Equinix, Inc. (EQIX - Analyst Report) is set to release its fourth quarter report on Feb 13.

Our Take

Despite highly leveraged balance sheet, 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. Moreover completion of the tower agreement with T-Mobile USA will allow Crown Castle to access nearly 7,100 wireless towers, thereby strengthening its market position.

Currently, Crown Castle carries a Zacks Rank #2 (Buy).

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