Crown Castle (CCI) To Report Q4 Earnings: What's In Store?

Crown Castle International Corp. (NYSE:CCI) is scheduled to release fourth-quarter 2017 results, after the closing bell on Jan 24.

While the company’s bottom line matched the Zacks Consensus Estimate in two of the previous four quarters, it lagged the same in the remaining two quarters with an average beat of 2.53%.

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

Factors at Play

Crown Castle competes in a highly competitive wireless tower operator industry with incumbents like American Tower Corp. (NYSE:AMT) and SBA Communications Corp. (NASDAQ:SBAC) . Consolidation in the wireless industry may reduce demand for cell tower deployments and therefore is expected to have an adverse effect on Crown Castle’s top line.

The merger between AT&T (NYSE:T) and Leap Wireless had a bearing on Crown Castle as it has 1,300 towers with both the carriers. Likewise, the combined entity of T-Mobile US and MetroPCS negatively impacted Crown Castle that had 1,400 towers jointly shared by these companies. Also, the merger between Sprint and Clearwire served as a hurdle for Crown Castle as both share 2,700 of its towers.

Furthermore, customer concentration is very high for Crown Castle. Historically, the top four among its customers, Verizon, AT&T, Sprint, and T-Mobile, accounted for majority of its total revenues, of which AT&T contributes a handful amount of site rental revenues. Loss of any of these customers or consolidation among them will significantly affect the company’s top line.

Evolution of new technologies may reduce the demand for site leases as well. Developments of satellite-delivered radio and video services are likely to 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.

On the flip side, Crown Castle’s continuous efforts in repositioning itself from being a tower company to a fiber provider (focused on the small cell opportunity) looks impressive. Over the last two years, Crown Castle purchased three fiber operators - FPL FiberNet Holdings, LLC (in January 2017), Quanta Fiber (called Sunesys, in April 2015) and 24/7 Mid-Atlantic Network (in September 2014).

On Jun 26, 2017, Crown Castle International completed the acquisition of privately-held Wilcon Holdings LLC. Notably, Wilcon is the premier service provider of dark fiber, lit transport, Internet access and colocation services in Southern California. Currently, it owns 1,900 route miles of fiber in Los Angeles and San Diego. As a result, Crown Castle gained 28,000 route miles of fiber.

On Nov 1, 2017, Crown Castle completed the buyout of LTS Group Holdings LLC (Lightower) from Berkshire Partners, Pamlico Capital and other investors for approximately $7.1 billion in cash (subject to certain limited adjustments). With this buyout, Crown Castle is anticipated to attain ownership over 60,000 route miles of fiber. These deals are expected to increase opportunities for small cell network deployments in top metro markets.

Moreover, 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), fixed wireless broadband.

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

Buoyed by such tailwinds, Crown Castle’s shares have gained 5.17%, against the industry’s loss of 2.99% 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 +0.16%. This is because; the Most Accurate estimate is $1.07 while the Zacks Consensus Estimate is pegged at $1.06. 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 #4 (Sell).

We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Crown Castle International Corporation Price and EPS Surprise

Key Pick

Alexandria Real Estate Equities Inc. (NYSE:ARE) has the right combination of elements to post an earnings beat when it expectedly posts fourth-quarter 2017 results on Jan 29. The company has an Earnings ESP of +0.65% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alexandria Real Estate Equities’ earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters with, an average beat of 0.34%.

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