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Key Factors to Impact Crown Castle (CCI) in Q4 Earnings

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Crown Castle International Corp. (CCI - Free Report) is scheduled to release fourth-quarter and 2020 results on Jan 27, after the closing bell. The company’s quarterly results are expected to reflect year-over-year growth in revenues and funds from operations (FFO) per share.

The Houston-based real estate investment trust (REIT) surpassed the Zacks Consensus Estimate for adjusted funds from operations (AFFO) per share by 0.6% in the last reported quarter. Growth in site-rental revenues also aided the top-line performance. However, services and other revenues were down during the quarter.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on one occasion and missed in the other three. It delivered a negative surprise of 3.2%, on average, during this period. The graph below depicts this surprise history:

Let’s see how things have shaped up prior to this announcement.

Factors at Play

Crown Castle’s extensive portfolio of 48,000 towers, spread across the top 100 markets in the United States, has been attracting new businesses from carriers that are seeking network expansion and densification amid the growing mobile-data scenario.

Moreover, the company has been making efforts to extend its communication infrastructure footprint and is investing significantly in its fiber segment on the back of acquisitions, and construction of small cells and fiber.

In fact, its urban skew and ability to offer a holistic network solution provides it a competitive edge over other tower companies. Markedly, in November 2020, the company became the anchor infrastructure partner on the tower side for DISH Network (DISH - Free Report) after bagging a long-term lease agreement with the latter to rent out space on up to 20,000 of its communication towers.

The company’s fiber business was not significantly affected by the pandemic and booking levels are expected to have remained decent. Management expects 3% revenue growth for the fiber business in 2020.

As data volume for wireless and wired network has been growing rapidly amid the widespread adoption of smartphones and applications, the company’s customers have continued to invest more in their networks in a bid to improve and densify their networks. This along with additional spectrum deployment has been driving growth in the company’s tower business. This too is expected to have supported its top-line performance. In fact, management expects its tower segment growth to be 5% in 2020.

Increased tower activity is likely to have supported Crown Castle’s network services revenues in the fourth quarter.  In fact, the consensus estimate for net revenues from the network services and other segment is pinned at $175 million for the fourth quarter, suggesting 37% year-over-year growth.

Also, the Zacks Consensus Estimate for fourth-quarter revenues is pegged at $1.5 billion, indicating year-over-year growth of 6.4%.

However, the acceleration from T-Mobile’s merger with Sprint has been slower than expected. This has likely resulted in the timing difference of Crown Castle’s tower activity that has been postponed from the second half of 2020 to the first half of 2021. Addressing this, Crown Castle reduced its outlook for 2020.

In fact, the company expects site-rental revenues of 5,307-$5,327 million as compared with $5,337-$5,382 million mentioned earlier. Adjusted EBITDA is projected at $3,409-$3,429 million as compared with the previously mentioned $3,479-$3,524 million. AFFO per share is anticipated to be $6.07-$6.11.

Moreover, with the merger of T-Mobile and Sprint, Crown Castle is likely to have witnessed churn at overlapping sites of the merged companies. This is likely to hinder performance.

Prior to the fourth-quarter earnings release, there is a lack of solid catalysts for becoming optimistic about the company’s business activities and prospects. Thus, the Zacks Consensus Estimate of FFO per share for the fourth quarter has been unchanged at $1.65 over the past 30 days, indicating a 20% increase over the prior-year quarter.

The same for 2020 is pinned at $6.08 and suggests a 6.9% increase from that reported in 2019.

Here is what our quantitative model predicts:

Our proven model does not conclusively predict a surprise in terms of FFO per share for Crown Castle this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Crown Castle has a Zacks Rank #4 (Sell), at present and an Earnings ESP of 0.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks That Warrant a Look

Here are some stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a surprise for the fourth quarter:

Healthpeak Properties, Inc. (PEAK - Free Report) , set to report quarterly numbers on Feb 9, currently has an Earnings ESP of +4.40% and a Zacks Rank of 3.

WashREIT (WRE - Free Report) , slated to release quarterly earnings on Feb 11, has an Earnings ESP of +0.59% and a Zacks Rank of 3 at present.

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