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Crown Castle International Inc.’s (CCI - Analyst Report) – the second-largest tower company afterAmerican Tower Corporation (AMT - Analyst Report) – reported its first-quarter 2013 adjusted earnings per share of 5 cents meeting the Zacks Consensus Estimate. The company also raised its fiscal 2013 financial guidance mainly based on the upgrading of LTE networks from all four major carriers in the U.S.
Quarterly GAAP net income was approximately $15.5 million or 5 cents per share compared with a profit of $50.0 million or 17 cents per share in the year-ago quarter.
Net revenue in the quarter increased 34.1% year over year to $740.1 million, surpassing the Zacks Consensus Estimate of $688 million. This was mainly due to improved performance by both the Site Rental and the Network Services segment.
Gross margin in the first quarter was 65.5% compared with 72.0% in the year-ago quarter. Operating income was $235.0 million compared with $202.3 million in the prior-year quarter. Quarterly adjusted EBITDA was approximately $440.8 million, representing a year-over-year upside of 22.4%.
During the first quarter of 2013, funds flow from operations (FFO) was $214.6 million compared with $190.5 million in the prior-year quarter. FFO per share in the reported quarter was 73 cents compared with 67 cents in the year-ago quarter. Quarterly adjusted funds flow from operations (AFFO) was $291.2 million compared with $198.3 million in the previous quarter. AFFO per share in the reported quarter was $1.00 compared with 69 cents in the year-ago quarter. During the reported quarter, Crown Castle bought 0.3 million common shares for $23.6 million at an average price of $69 per share.
At the end of the first quarter of 2013, Crown Castle had cash & marketable securities of approximately $160.9 million on its balance sheet compared with $441.4 million at the end of 2012. Total debt was approximately $10,741.3 million at the end of the reported quarter versus $10,923.2 million at the end of 2012. At the end of the reported quarter, the debt-to-capitalization ratio was 0.78 versus 0.79 at the end of 2012.
Site Rental Segment
Quarterly revenue was $615.4 million, up 23.7% year over year. Gross margin for the segment was 71.1% compared with 75.3% in the prior-year quarter.
Network Services Segment
Quarterly revenues were $124.6 million, up by a massive 129.9% year over year. Gross margin for the segment was 37.9% compared with 41.9% in the prior-year quarter.
Management Outlook for the second Quarter of 2013
Crown Castle expects Site Rental revenues in the range of $612 million to $617 million. Site Rental cost of operation is projected in the band of $179 million to $184 million. Adjusted EBITDA is anticipated between $426 million and $431 million. Site Rental gross margin is anticipated to be between $430 and $435 million. Interest expense (inclusive of amortization) is estimated in the $138 million to $143 million range. FFO is estimated in the range of $255 million to $260 million. AFFO is estimated in the $274 million to $279 million range. Net income is expected in the range of $23 million to positive $63 million or 8 cents to 22 cents per share.
Management Outlook for 2013
Crown Castle expects Site Rental revenue to be in the range of $2,470 million to $2,480 million. Site Rental cost of operation is projected in the $715 million to $725 million range. Site Rental gross margin is expected between $1,749 to 1,759 million. Adjusted EBITDA is anticipated between $1,722 million and $1,732 million. Interest expense (inclusive of amortization) is estimated in the $584 million to $594 million range. FFO is estimated in the range of $982 million to $992 million. AFFO is estimated in the $1,126 million to $1,136 million range. Net income is expected to be between $102 million and $198 million or 35 cents to 68 cents per share.
Other Stocks Set for Earnings Release
Another company belonging to the same industry is SBA Communications Corp. (SBAC - Snapshot Report) and is expected to release its first-quarter financial results on Apr 29, 2013.
Earnings of Related Companies
On Apr 24, 2013, Equinix Inc. (EQIX - Analyst Report) declared its first-quarter 2013 adjusted earnings of 75 cents missing the Zacks Consensus Estimate of 79 cents.
Despite a highly leveraged balance sheet, we believe that strong financial outlook, continuous acquisitions and huge demand for network due to increased usage of smartphones will act as tailwinds for the company. 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 Castlehas a Zacks Rank #3 (Hold).