Why Is Crown Castle (CCI) Down 4.2% Since Last Earnings Report?

A month has gone by since the last earnings report for Crown Castle (CCI). Shares have lost about 4.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Crown Castle due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Crown Castle Surpasses Q3 FFO Estimates, Issues '20 View

Crown Castle reported third-quarter 2019 adjusted funds from operations (AFFO) per share of $1.55, up 12% year over year. Further, the reported figure surpassed the Zacks Consensus Estimate of $1.48.

Results reflected benefits from the company’s extensive tower portfolio, high demand for infrastructure and healthy leasing activity. The year-over-year increase in the bottom line reflects growth in site-rental revenues.

Net revenues for the reported quarter amounted to $1.51 billion, suggesting 10.1% year-over-year growth. Moreover, the reported figure outpaced the Zacks Consensus Estimate of $1.47 billion.

Site-rental revenues came in at around $1.3 billion, up 6.4% year over year, which included organic growth, as well as contributions from straight-lined revenues. Particularly, site-rental revenues during the September-end quarter recorded 6% organic growth, driven by new leasing activity, as well as contracted tenant escalations.

Operating Metrics

Quarterly operating income increased 26.2% from the prior-year quarter to $453 million. However, operating expenses flared up 4.4% year over year to nearly $1.1 billion. Quarterly adjusted EBITDA was approximately $882 million, representing year-over-year jump of 11%.

Cash Flow and Liquidity

Crown Castle exited third-quarter 2019 with cash and cash equivalents of $182 million, down from the $277 million reported at the end of 2018.

Furthermore, as of Sep 30, 2019, the company generated around $1.9 billion of net cash from operating activities compared with the roughly $1.8 billion reported in the year-ago period.

Also, debt and other long-term obligations aggregated approximately $17.7 billion, up from the $16.6 billion witnessed at the end of 2018.

Dividend Payout

During the September-end quarter, Crown Castle paid common stock dividend of $1.125 per common share, up approximately 7% from the year-earlier quarter.

2019 Outlook

Crown Castle has reiterated its outlook for full-year 2019. The company expects site-rental revenues of $4,950 million to $4,980 million. Adjusted EBITDA is projected at $3,393-$3,423 million.

The company’s FFO is anticipated in the $2,363-$2,393 million range. Also, AFFO is projected at $2,464-$2,494 million.

2020 Outlook

The company has also provided its outlook for full-year 2020. It expects site-rental revenues of $5,196 million to $5,241 million. Adjusted EBITDA is projected at $3,569 million-$3,614 million.

Additionally, FFO is anticipated in the $2,539-$2,584 million range. Also, AFFO is projected at $2,662-$2,707 million.

This guidance assumes that the proposed merger between T-Mobile and Sprint closes prior to the end of first-quarter 2020. It also reflects the impact of the mandatory conversion of preferred stock to common shares that is expected to occur in August 2020. This will increase the diluted weighted average common shares outstanding for 2020 by nearly 6 million shares.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Crown Castle has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Crown Castle has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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