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Crown Castle (CCI) Plans Operational Changes, Revises '24 View

Crown Castle CCI recently announced a strategic plan designed to drive operational efficiencies and enhance returns in fiber solutions and small cells. It has also updated its full-year 2024 outlook.

Crown Castle commenced a comprehensive strategic and operational review of its Fiber segment in January 2024. Although the review is still ongoing, involving third parties, the company has completed its operational review and is now making adjustments to its operational plans in accordance with the findings.

CCI identified opportunities for significant future enterprise fiber and small cell demand during their operational review. These opportunities arise from locations that are either situated on or near the company's existing high-quality fiber footprint.

The operational changes anticipated by the company, along with the delays in delivering certain ongoing small cell projects, are projected to lead to a decrease of 3,000 to 5,000 new revenue-generating small cell nodes in 2024. Moreover, there will be a reduction of approximately $15 million in new leasing activity in the year. Despite these reductions, Crown Castle maintains its expectation that there is sufficient demand to achieve double-digit growth in small cell revenues over the next few years.

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In its fiber solutions business, Crown Castle is confident in its ability to lower discretionary capital expenditures going forward. With significant market opportunities near its existing assets, the company anticipates enhancing capital efficiency and achieving 2% annual organic revenue growth in 2024 through the implementation of a new sales strategy. This growth is expected to pave the way for returning long-term annual organic revenue growth of 3% in fiber solutions starting in 2025.

Crown Castle anticipates a decrease in gross capital expenditures in its Fiber segment, ranging from $275 million to $325 million in 2024. Additionally, the company is reducing staffing levels by more than 10% from the current levels.

The expected annualized run-rate cost savings resulting from the staffing reductions, along with other operational savings, will mainly impact the Fiber segment and corporate departments. These measures are projected to lead to around $100 million in cost savings, with $60 million expected to benefit in full-year 2024 results.

The company has revised its full-year 2024 outlook. It now expects adjusted funds from operations (AFFO) per share in the range of $6.91 to $7.02, an increase of 6 cents at the midpoint from the previous guidance range.

AFFO is anticipated to be within $3.005-$3.055 billion, marking an increase of $25 million due to a reduction in interest expense driven by lower 2024 capital expenditures.

However, the company now projects site rental revenues in the range of $6.317-$6.362 billion, indicating a $30 million decrease at the midpoint from the prior guidance range. Net income is expected to be in the range of $1.125-$1.190 billion, declining $95 million primarily due to restructuring charges.

Over the past three months, shares of this Zacks Rank #3 (Hold) company have declined 8.9% compared with the industry's fall of 4.9%.

 

Zacks Investment Research
Zacks Investment Research


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Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Lamar Advertising LAMR and Americold Realty Trust COLD, 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 LAMR’s 2024 funds from operation (FFO) per share has moved 3.7% northward over the past two months to $8.03.

The Zacks Consensus Estimate for COLD’s current-year FFO per share has been raised 3.6% over the past month to $1.44.

Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.

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Crown Castle Inc. (CCI) : Free Stock Analysis Report

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