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Should You Retain Crown Castle (CCI) in Your Portfolio Now?
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Crown Castle (CCI - Free Report) owns a portfolio of wireless communication infrastructure assets in the United States. It is well-poised to benefit from the increase in mobile data usage, spectrum availability and high capital spending by wireless carriers to deploy 4G and 5G networks amid incremental customer demand. However, customer concentration and consolidation in the wireless industry are key concerns for the company. High interest rates add to its woes.
What’s Aiding It?
The exponential growth in mobile data usage, higher availability of spectrum and deployment of 5G networks at scale are driving significant network investments by carriers who aim to improve and densify their cell sites. Moreover, wireless data consumption is expected to increase considerably over the next several years.
This is likely to be driven by the advent of next-generation technologies, including edge computing functionality, autonomous vehicle networks and the Internet of Things and the rampant usage of network-intensive applications for video conferencing, cloud services and hybrid-working scenarios.
Given Crown Castle’s unmatched portfolio of more than 40,000 cell towers and approximately 90,000 route miles of fiber (as of the first quarter of 2024) in the top 100 basic trading areas of the United States, it remains well-positioned to capitalize on this upbeat trend.
The company’s investments in the fiber and small cell business on the back of acquisitions, constructions and new deployments complement its tower business and offer meaningful upside potential to its 5G growth strategy. Management is working on increasing small-cell deployments and expects to deliver 16,000 new nodes in 2024.
Solid dividend payouts are arguably the biggest enticement for REIT shareholders, and Crown Castle is committed to that. The company’s dividends are supported by high-quality, long-term contracted lease payments, and it benefits from being a provider of mission-critical shared communication infrastructure assets. CCI has increased its dividend four times in the last five years, and its five-year annualized dividend growth rate is 8.21%. Check Crown Castle’s dividend history here.
What’s Hurting It?
Customer concentration is very high for Crown Castle. As of Mar 31, 2024, around three-fourths of the company’s site rental revenues were derived from T-Mobile (35%), Verizon (19%) and AT&T (20%). A loss of any of these customers or consolidation among them will significantly affect the company’s top line. Moreover, any pullback or rationalization in network spending by carriers might affect Crown Castle’s performance.
Crown Castle has a substantially leveraged balance sheet and a significant amount of debt relative to its cash flows. The company’s debt and other long-term obligations aggregated $22.56 billion as of Mar 31, 2024. Moreover, in an elevated interest rate environment, additional borrowings to fund near-term capital expenditures will not only inflate the company’s debt but also raise the cost of borrowings.
Management expects incurring interest expenses and amortization of deferred financing costs between $933 million and $978 million in 2024. Further, with high interest rates still in place, the dividend payout might seem less attractive than the yields on fixed-income and money market accounts.
Over the past month, shares of this Zacks Rank #3 (Hold) company have risen 2.9% compared with the industry’s upside of just 0.1%.
The Zacks Consensus Estimate for Iron Mountain’s current-year FFO per share is currently pegged at $4.42, which suggests an increase of 7.28% year over year.
The Zacks Consensus Estimate for Rexford Industrial Realty’s ongoing year’s FFO per share is pegged at $2.34 at present, which calls for a 6.85% increase year over year.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Should You Retain Crown Castle (CCI) in Your Portfolio Now?
Crown Castle (CCI - Free Report) owns a portfolio of wireless communication infrastructure assets in the United States. It is well-poised to benefit from the increase in mobile data usage, spectrum availability and high capital spending by wireless carriers to deploy 4G and 5G networks amid incremental customer demand. However, customer concentration and consolidation in the wireless industry are key concerns for the company. High interest rates add to its woes.
What’s Aiding It?
The exponential growth in mobile data usage, higher availability of spectrum and deployment of 5G networks at scale are driving significant network investments by carriers who aim to improve and densify their cell sites. Moreover, wireless data consumption is expected to increase considerably over the next several years.
This is likely to be driven by the advent of next-generation technologies, including edge computing functionality, autonomous vehicle networks and the Internet of Things and the rampant usage of network-intensive applications for video conferencing, cloud services and hybrid-working scenarios.
Given Crown Castle’s unmatched portfolio of more than 40,000 cell towers and approximately 90,000 route miles of fiber (as of the first quarter of 2024) in the top 100 basic trading areas of the United States, it remains well-positioned to capitalize on this upbeat trend.
The company’s investments in the fiber and small cell business on the back of acquisitions, constructions and new deployments complement its tower business and offer meaningful upside potential to its 5G growth strategy. Management is working on increasing small-cell deployments and expects to deliver 16,000 new nodes in 2024.
Solid dividend payouts are arguably the biggest enticement for REIT shareholders, and Crown Castle is committed to that. The company’s dividends are supported by high-quality, long-term contracted lease payments, and it benefits from being a provider of mission-critical shared communication infrastructure assets. CCI has increased its dividend four times in the last five years, and its five-year annualized dividend growth rate is 8.21%. Check Crown Castle’s dividend history here.
What’s Hurting It?
Customer concentration is very high for Crown Castle. As of Mar 31, 2024, around three-fourths of the company’s site rental revenues were derived from T-Mobile (35%), Verizon (19%) and AT&T (20%). A loss of any of these customers or consolidation among them will significantly affect the company’s top line. Moreover, any pullback or rationalization in network spending by carriers might affect Crown Castle’s performance.
Crown Castle has a substantially leveraged balance sheet and a significant amount of debt relative to its cash flows. The company’s debt and other long-term obligations aggregated $22.56 billion as of Mar 31, 2024. Moreover, in an elevated interest rate environment, additional borrowings to fund near-term capital expenditures will not only inflate the company’s debt but also raise the cost of borrowings.
Management expects incurring interest expenses and amortization of deferred financing costs between $933 million and $978 million in 2024. Further, with high interest rates still in place, the dividend payout might seem less attractive than the yields on fixed-income and money market accounts.
Over the past month, shares of this Zacks Rank #3 (Hold) company have risen 2.9% compared with the industry’s upside of just 0.1%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are Iron Mountain Incorporated (IRM - Free Report) and Rexford Industrial Realty, Inc. (REXR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Iron Mountain’s current-year FFO per share is currently pegged at $4.42, which suggests an increase of 7.28% year over year.
The Zacks Consensus Estimate for Rexford Industrial Realty’s ongoing year’s FFO per share is pegged at $2.34 at present, which calls for a 6.85% increase year over year.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.