Growth in mobile data usage, spectrum availability and high-network investments in wireless carriers will likely spur demand for
Crown Castle International Corp.’s ( CCI Quick Quote CCI - Free Report) properties.
The ability to offer a holistic network solution with towers, fiber and small cells, and ample liquidity poises Crown Castle well for long-term growth.
As the data volume of wireless and wired networks is growing rapidly amid the widespread adoption of smartphones and applications, the network carriers continue to spend on network deployments to harness spectrum abilities as well as improve and densify their cell sites and coverage.
Hence, to capitalize on this opportunity, Crown Castle and other tower operators like
SBA Communications ( SBAC Quick Quote SBAC - Free Report) are increasingly investing in new small cell and fiber assets to enhance the network density required for their customers’ wireless networks.
A strong and creditworthy tenant base adds resiliency to Crown Castle’s business. CCI has long-term (typically 5-15 year) tower lease agreements with top U.S. carriers, which contribute to recurring site rental cash flows over the long term.
Additionally, Crown Castle has sufficient liquidity and enjoys a decent balance sheet position. CCI exited third-quarter 2021 with cash and cash equivalents of $357 million, and $5 billion of undrawn capacity in its revolver. As of the third-quarter end, CCI enjoyed investment-grade credit ratings of BBB-, BBB+ and Baa3 from Standard & Poor’s, Fitch and Moody’s, respectively, facilitatingits access to the debt markets at attractive terms.
However, tenant concentration is very high for Crown Castle. In fact, the top three among its customers, namely
Verizon ( VZ Quick Quote VZ - Free Report) , AT&T ( T Quick Quote T - Free Report) and T-Mobile, accounted for majority of its total revenues.
Hence, loss of either Verizon, AT&T and T-Mobile or any consolidation among the threewill significantly hamper Crown Castle’s top line. CCI’s performance is dependent on carrier spending and therefore, any pullback or rationalization in network spending by tenants might adversely affect its growth.
Shares of this currently Zacks Rank #3 (Hold) Crown Castle have appreciated 17.3% year to date, underperforming the
industry’s rally of 24.2%. However, the estimate revision trend of 2021 fund from operations (FFO) per share indicates a favorable outlook for CCI as the same has been revised marginally upward over the past two months. Image Source: Zacks Investment Research
The Zacks Consensus Estimate for SBA Communications’ current-year FFO per share has been raised 1% in the past month. SBAC currently has a Zacks Rank of 3.
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Over the last four quarters, SBAC’s FFO per share surpassed the consensus estimate on all occasions, the average being 2.89%. Shares of SBAC have appreciated 19.3% in the past six months, outperforming the industry’s rally of 10%.
The Zacks Consensus Estimate for Verizon’s 2021 FFO per share has moved marginally north in the past two months. VZ is currently Zacks #3 Ranked.
Over the last four quarters, Verizon’s FFO per share surpassed the consensus mark on all occasions, the average being 3.73%. Shares of VZ have declined 5.7% in the past three months, compared with the industry’s decrease of 10.3%.
The Zacks Consensus Estimate for AT&T’s 2021 FFO per share has moved marginally south in the past week. T is currently a #3 Ranked player.
AT&T’s FFO per share surpassed the consensus mark inall the last four quarters, the average being 10.02%. Shares of T have declined 9.8% in the past three months compared with the industry’s fall of 10.3%.
Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.