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Crown Castle (CCI) to Report Q1 Earnings: What's in Store?

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Crown Castle International Corp. (CCI - Free Report) is scheduled to release first-quarter 2018 results, after the closing bell on Apr 18.

For this Houston-based REIT, which is engaged in operation of wireless communication towers in the United States, the bottom line exceeded the Zacks Consensus Estimate in the previous quarter. Results were backed by 28.6% year-over year increase in site rental revenues that included organic growth, as well as contributions from acquisitions and other items.

Over the trailing four quarters, the company delivered an average positive surprise of 5.67% in terms of funds from operations (FFO) per share. This is depicted in the graph below:

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Crown Castle is well poised to benefit from the high level of investment activity of its key customers. The company’s portfolio of assets is expected to witness decent demand in the quarter to be reported and leasing activity across towers, small cells and fiber solutions is likely to remain strong.

The company’s continued efforts in repositioning itself from being a tower company to a fiber provider (focused on the small cell opportunity) look impressive. In 2017, the company fortified its portfolio with the acquisitions of FiberNet, Wilcon and Lightower that operate in top U.S. markets. These markets have been experiencing high demand for network investment by the company’s customers.

For the first quarter of 2018, Crown Castle expects Site Rental revenues of $1,132-$1,142 million. The Zacks Consensus Estimate for the same is $1,138 million, denoting a projected increase of 8.3%, sequentially.

Moreover, the Zacks Consensus Estimate for the company’s site rental revenues for towers is currently pegged at $747 million for the first quarter, reflecting a projected increase of 0.8% sequentially. Site rental revenues for fiber are projected at $392 million, denoting an estimated surge of 26.5%.

Further, the Zacks Consensus Estimate for first-quarter revenues is $1.31 billion, indicating year-over-year projected growth of 29.0%. The Zacks Consensus Estimate for FFO per share for the quarter is pegged at $1.34, reflecting a rise of around 8.1%.

In addition to the above, the deployment of 5G is expected to drive growth on both the company’s tower and small-cell assets. This is because the wireless carriers look to expand and enhance their networks to provide the coverage, capacity and speed needed to support mobile video, the Internet of Things (IoT), and fixed wireless broadband.

Remarkably, the IoT space is touted as the next big thing in the evolution of technology and higher investment by the wireless carriers. It is anticipated to boost the company’s revenues.

However, Crown Castle competes in a highly competitive wireless tower operator industry, with incumbents like American Tower Corp. (AMT - Free Report) and SBA Communications Corp. (SBAC - Free Report) . Consolidation in the wireless industry might reduce demand for cell-tower deployments and therefore is expected to impact Crown Castle’s top-line performance.

Furthermore, customer concentration is very high for Crown Castle. Loss of any of these customers or consolidation among them will significantly affect the company’s revenues. Evolution of new technologies might bring down the demand for site leases as well. Developments of satellite-delivered radio and video services will likely weigh on the need for tower-based broadcast transmission. In addition, frequent changes in demand for infrastructure support and network services will tend to increase volatility in Crown Castle’s revenues.

Prior to the first-quarter earnings release, there was lack of any solid catalyst for becoming overtly optimistic about the company’s business activities and prospects. As such, the Zacks Consensus Estimate of FFO per share for the to-be-reported quarter remained unchanged at $1.34 over the past 30 days.

Crown Castle’s shares have inched up 0.3%, against the industry’s loss of 4.5% in the past three months.



Earnings Whispers

Our proven model does not conclusively show that Crown Castle is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Crown Castle has an Earnings ESP of +0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.34. You can uncover the best stocks to buy or sell before they’re reported with the Earnings ESP Filter.

Zacks Rank: Crown Castle has a Zacks Rank of 3.

Key Pick

SL Green Realty Corporation (SLG - Free Report) has the right combination of elements to post an earnings beat when it posts first-quarter 2018 results on Apr 18. This Zacks #3 Ranked company has an Earnings ESP of +0.95%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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