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What's in the Cards for Crown Castle (CCI) in Q1 Earnings?

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Crown Castle International Corp. (CCI - Free Report) is scheduled to release first-quarter 2019 results on Apr 17, after the closing bell. The company’s first-quarter results are expected to reflect year-over-year growth in funds from operations (FFO) per share, as well as revenues.

The Houston-based real estate investment trust (REIT), which is engaged in operation of wireless communication towers in the United States, missed the Zacks Consensus Estimate in terms of adjusted funds from operations (AFFO) per share by 1.39% in the last reported quarter. Nonetheless, the company witnessed growth in site-rental revenues, driven by strong new leasing activity and contracted tenant escalations.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate in two occasions and missed in the other two. It delivered average negative surprise of 0.17% during this period. The graph below depicts this surprise history:

Crown Castle International Corporation Price and EPS Surprise
 

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

Factors at Play

Crown Castle has been making significant investments in small cells and fiber business. Amid robust trends in the U.S tower and fiber markets, these efforts positioned the company to benefit from its shared communication infrastructure assets, in the first quarter.

Moreover, amid growing demand for data volume and deployment of 5G network, wireless carriers are expanding and enhancing their networks. This is aimed to provide the coverage, capacity and speed needed to support mobile video, Internet of Things (IoT) and fixed wireless broadband. Further, wireless data consumption is expected to shoot up considerably over the next several years, driven by increased innovation and adoption of data-driven mobile devices, and applications such as machine-to-machine (M2M) connections, social networking and streaming of video. Crown Castle’s extensive portfolio of towers and small cells has the network density required to meet such demands.

Accordingly, Crown Castle’s customers are leasing the company’s tower and fiber assets, along with adding new cell sites and spectrum. This is expected to boost leasing activity for the company’s tower business. In fact, site-rental revenues from its tower assets are estimated to be $801 million, a year-over-year increase of 4.8%.

Furthermore, strong demand catalysts like robust 4G spending and increasing 5G investments, are believed to have benefited the company’s small-cells portfolio. Although Crown Castle primarily depends on four customers for its revenue growth, material booking volumes from smaller players will likely drive the company’s Q1 results.

Nonetheless, a high-leveraged balance sheet remains a concern for Crown Castle. In addition, as carriers are looking for opportunities to rationalize spending, merger between the company’s major customers remains a near-term headwind.

Also, 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 Jan-Mar quarter remained unchanged at $1.43, over the past 30 days.

Earnings Whispers

Our proven model does not conclusively show that Crown Castle’s results will likely 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. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

Earnings ESP: Crown Castle has an Earnings ESP of 0.00%.

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

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.

Stocks That Warrant a Look

Here are a few 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 positive surprise this quarter:

Prologis, Inc. (PLD - Free Report) , slated to report first-quarter results on Apr 16, has an Earnings ESP of +0.46% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vornado Realty Trust (VNO - Free Report) , scheduled to release earnings on Apr 29, has an Earnings ESP of +7.53% and a Zacks Rank of 3.

Ventas, Inc. (VTR - Free Report) , set to report quarterly figures on Apr 26, has an Earnings ESP of +0.7% and a Zacks Rank of 3.

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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