Crown Castle (CCI) to Post Q3 Earnings: What Lies Ahead?

Crown Castle International Corp. CCI is scheduled to release third-quarter 2018 results on Oct 17, after the closing bell. The company’s results will 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, narrowly missed the Zacks Consensus Estimate in terms of adjusted funds from operations (AFFO) per share in the last reported quarter. Nonetheless, results reflected increase in site rental revenues.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate in two occasions for as many misses. It delivered an average negative surprise of 4.05% during this period. The graph below depicts this surprise history:

Crown Castle International Corporation Price and EPS Surprise
 

 

Crown Castle International Corporation Price and EPS Surprise | Crown Castle International Corporation Quote

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

Factors at Play

Crown Castle is well poised to benefit from its portfolio of shared communication infrastructure assets, including a portfolio of more than 40,000 towers in the third quarter.

Notably, the company expects site rental revenues of $1,172-$1,182 million for the Jul-Sep quarter. The Zacks Consensus Estimate for the same is pegged at $1.18 million, reflecting a marginal increase sequentially.

Importantly, increasing growth in mobile data consumption has been spurring demand for denser network of towers and small cells. Hence, the company is focusing to reposition itself from being a tower company to a fiber-fed small-cell provider.

In fact, for third-quarter 2018, site rental revenues from small cells are projected at $405 million, an increase from the prior-year reported figure of $398 million. Moreover, the Zacks Consensus Estimate for the company’s site rental revenues for towers is currently pinned at $776 million for the quarter, indicating an estimated increase of 7% year over year.

Prior to the third-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 to-be-reported quarter remained unchanged at $1.38 over the past 30 days. Meanwhile, the company expects third-quarter 2018 FFO to be in the $490-$500 million band.

Further, popularity of the Voice over WiFi network is increasing in metro cities. With both mobile handset manufacturers and wireless carriers rapidly adopting the technology, Crown Castle’s revenues in the quarter under review may come under pressure.

Also, shares of Crown Castle have underperformed the industry it belongs to, in the past six months. During this period, shares of the company have declined 0.6%, as against the industry’s rally of 2%. 

 

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 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 -0.21%.

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

Stock to Consider

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:

Ventas Inc. VTR, slated to release third-quarter results on Oct 26, has an Earnings ESP of +0.1% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Duke Realty Corporation DRE scheduled to report earnings on Oct 24, has an Earnings ESP of +2.56% and a Zacks Rank #2.

HCP, Inc. HCP, set to release quarterly numbers on Oct 31, has an Earnings ESP of +1.68% 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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