We are reaffirming our long-term Neutral recommendation on Crown Castle International (CCI - Analyst Report) ahead of its first-quarter 2013 financial results. The company is expected to continue its momentum going forward.
Higher usage of smartphones and tablets and increased deployment of 4G LTE networks have propelled demand for tower requirement by large carriers. Moreover, the acquisition of NextG Networks Inc. (which comprised 7,000 Distributed Antenna Systems) and the purchase of 7,200 wireless towers from T-Mobile USA have made it the largest wireless tower operator in the U.S.
Crown Castle’s top-line growth prospect remains high as it has become imperative for the carriers to improve network quality and coverage to meet the growing demand for data and video. As moving equipment from one tower to another is cumbersome, carriers normally renew these contracts upon expiration, which implies that a high percentage of Crown Castle’s revenue is recurring, hence reduces customer loss.
Additionally, an expected hike in the annual price by about 3-5% will further act as a growth catalyst for Crown Castle, going forward.
However, a highly leveraged balance sheet and the ongoing merger deals between large telecom carriers may act as headwinds for the company, going forward. Crown Castle is currently trading at the high end of its 52-week price range.
Crown Castle carries a Zacks Rank #3 (Hold).
Other Stocks Outlook in Related Industries
Other stocks in this sector like SBA Communications Corp. (SBAC - Snapshot Report), Equinix, Inc. (EQIX - Analyst Report) and American Tower Corporation (AMT - Analyst Report) are set to gain from the robust growth of LTE deployments in the future. Equinix and SBA are expected to declare results on Apr 24 and Apr 29, respectively. AMT will deliver its results on May 1, 2013.
Currently, SBA has a Zacks Rank #2 (Buy) while American Tower and Equinix carry a Zacks Rank #3 (Hold).