Crown Castle International (NYSE:CCI) Corp. CCI is scheduled to release first-quarter 2020 results on Apr 29, after the closing bell. The company’s quarterly results are expected to reflect year-over-year growth in funds from operations (FFO) per share and revenues.
The Houston-based real estate investment trust (REIT) missed the Zacks Consensus Estimate in terms of adjusted funds from operations (AFFO) per share by 6.76% in the last reported quarter. The company witnessed year-on-year revenue increase, reflecting growth in site-rental revenues. However, services and other revenues were down during the quarter. Management also noted that there was a “noticeable slowdown in activity” in the fourth quarter.
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on three occasions and missed in the other. It delivered an average positive surprise of 0.77% during this period. The graph below depicts this surprise history:
Crown Castle International Corporation Price and EPS Surprise
Crown Castle International Corporation price-eps-surprise | Crown Castle International Corporation Quote
Let’s see how things have shaped up prior to this announcement.
Factors at Play
Wireless carriers have been expanding and enhancing their networks for the past few quarters amid a rising demand for data volume. As such, Crown Castle, which has an unmatched portfolio of towers, small cells and fiber assets, is likely to have registered top-line growth in the March-end quarter.
The company enjoys incremental sales growth by adding new tenants to existing tower infrastructures, in turn, boosting profit margins. In fact, the Zacks Consensus Estimate for first-quarter 2020 site rental revenues moved up 7.6% year over year to $1,312 million.
Furthermore, with mobile devices and connections progressing from lower-generation network connectivity to higher-generation ones, like 4G, LTE and 5G, carrier-network investments have been growing at a rapid pace. This secular growth trend in the cellular tower sector is benefiting tower companies, including Crown Castle.
Amid this, robust small-cell deployments in the past quarters are anticipated to have boosted the company’s first-quarter site rental revenues from small-cell deployments by 6.3% to $440 million, year on year. Also, the Zacks Consensus Estimate for the quarterly site rental revenues from towers is pegged at $871 million, indicating an 8.2% year-over-year increase.
However, net revenues from network services and other segment are pinned at $136 million for the first quarter, suggesting a 34.3% year-over-year decline.
Consequently, the Zacks Consensus Estimate for total revenues is pegged at $1.45 billion, indicating a projected uptick of 1.7% year on year. Furthermore, Crown Castle’s FFO per share is likely to have witnessed a 2.8% increase to $1.49 during the same time frame.
However, the uncertainty involving the pending merger between T-Mobile and Sprint resulted in a slowdown in activity in the second half of 2019. Although an affirmation of the deal has taken place, a rebound in activity is unlikely in the first half of this year. As such, activity levels are likely to have been low in the first quarter.
Moreover, the company is facing stiff competition from other tower companies amid favorable industry fundamentals. This is likely to have depressed Crown Castle’s booking volumes as well as pricing power in the quarter under review. A highly-leveraged balance sheet is another concern for Crown Castle.
Prior to the first-quarter earnings release, there is lack of any solid catalyst for becoming optimistic about the company’s business activities and prospects. As such, the Zacks Consensus Estimate of FFO per share for the first quarter remained unchanged at $1.49, over the past 30 days.
Here is what our quantitative model predicts:
Our proven model does not conclusively predict a positive 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 carries a Zacks Rank #3 and 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 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:
SBA Communications Corporation (NASDAQ:SBAC) SBAC, set to report quarterly numbers on May 5, has an Earnings ESP of +0.44% and carries a Zacks Rank of 3 currently.
CoreSite Realty Corporation COR, slated to release first-quarter earnings on Apr 30, has an Earnings ESP of +3.19% and carries a Zacks Rank of 3 at present.
Americold Realty Trust COLD, expected to release earnings results on May 7, has an Earnings ESP of +9.74% and currently holds a Zacks Rank #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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