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Crown Castle (CCI) to Post Q1 Earnings: What's in the Cards?

Crown Castle Inc. CCI is scheduled to release first-quarter 2023 results on Apr 19 after the closing bell. Its quarterly results are likely to reflect year-over-year growth in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Houston, TX-based real estate investment trust’s (REIT) adjusted FFO per share surpassed the Zacks Consensus Estimate by 1.09%. The growth in site-rental revenues due to elevated tower space demand aided the top line.

Over the preceding four quarters, CCI’s FFO per share surpassed estimates on each occasion, the average being 1.66%. This is depicted in the graph below:

Crown Castle Inc. Price and EPS Surprise

Crown Castle Inc. price-eps-surprise | Crown Castle Inc. Quote

Factors to Note

The advancement in mobile technology, such as 4G and 5G networks, and the proliferation of bandwidth-intensive applications have driven the growth in mobile data usage globally. Also, rampant usage of network-intensive applications for video conferencing and cloud services, and remote-working scenarios have fueled the rise.

Crown Castle’s first-quarter earnings are likely to have benefited from the rise in capital spending by wireless carriers on the incremental demand from global 4G and 5G deployment efforts, growing wireless penetration and spectrum auctions.

This phenomenon is expected to have driven tower leasing demand during the to-be-reported quarter, boosting Crown Castle’s top-line growth.

Also, the company’s long-term lease agreements (typically five to 15 years) with the top United States carriers, having a strong credit profile, are anticipated to have aided its site rental revenues in the quarter.

The consensus estimate for net revenues from site rentals is pegged at $1.61 billion for the quarter, indicating 2.2% growth from the year-ago quarter’s reported figure. Our estimate for the same is $1.63 billion, implying an increase of 3.5% year over year.

The consensus estimate for net revenues from the network services and other segment stands at $165.8 million for the first quarter, remaining flat year over year.

The Zacks Consensus Estimate for first-quarter revenues is pegged at $1.80 billion, indicating an increase of 3.4% from the year-ago reported number. Our estimate for the same stands at $1.79 billion, suggesting a rise of 2.9%.

Further, CCI’s solid balance-sheet position is likely to have supported its small cell deployment efforts required to increase the capacity and density of the wireless network for 5G deployment.

Nonetheless, the rationalization of a portion of Sprint's legacy network by T-Mobile, one of Crown Caste’s key customers, is anticipated to have cast a pall on the company’s quarterly performance. Management expects a majority of the non-renewals to take place during the first quarter. This is likely to have negatively impacted year-over-year billings growth in the quarter.

Also, higher interest expenses are expected to have been a key headwind for the company during the to-be-reported quarter. We expect first-quarter 2023 interest expenses to rise 25.5% year over year.

The company’s activities in the to-be-reported quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been unchanged at $1.95 over the past two months. Nonetheless, the figure suggests a 4.3% increase from the prior-year quarter’s reported figure.

What Our Quantitative Model Predicts

Our proven model does not conclusively predict an FFO beat for Crown Castle this time. The right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that is not the case here.

Earnings ESP: Crown Castle has an Earnings ESP of -3.01%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Crown Castle currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks That Warrant a Look

Here are some stocks that are worth considering from the REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:

SL Green SLG is slated to release first-quarter earnings on Apr 19. SLG has an Earnings ESP of +0.44% and a Zacks Rank #3 at present.

Boston Properties BXP is scheduled to report quarterly figures on Apr 25. BXP has an Earnings ESP of +7.13% and a Zacks Rank #3 currently.

SBA Communications SBAC is slated to report quarterly numbers on May 1. SBAC has an Earnings ESP of +0.60% and carries a Zacks Rank #3 presently.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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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