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Can Crown Castle (CCI) Pull a Surprise in Q3 Earnings?


Crown Castle International Corp. CCI, a leading wireless communication tower operator in the U.S., is scheduled to report third-quarter 2016 financial numbers on Oct 20, after market close.

Last quarter, the company posted a 5.45% positive earnings surprise. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in three of the past four quarters, with an average beat of 3.93%. Let’s see how things are shaping up for this announcement.

Factors at Play

Crown Castle’s extensive tower portfolio, increased demand for infrastructure, strong business outlook, healthy leasing activity, continual acquisition of towers and growing demand for mobile broadband are major positives. Wireless services are rapidly gaining ground, courtesy of additional features and capabilities. Much of the infrastructure and upgrades require effective site management of cell towers and equipment. Crown Castle effectively addresses this opportunity as over 90% of its quarterly revenues come from wireless service providers like Verizon Communications Inc. VZ, AT&T Inc. T and T-Mobile US Inc. TMUS. Additionally, wireless consumer demand is expected to increase considerably over the next several years, driven by increased innovation and adoption of Internet of Things services.

The board of directors at Crown Castle has decided to reward stockholders with a quarterly cash dividend of $1.125 per common share. The quarterly dividend is payable on Nov 1, 2016, to shareholders of record at the close of business as of Oct 15, 2016.

However, consolidation in the wireless industry may reduce demand for cell tower deployment and therefore is expected to dent Crown Castle’s top line considerably. However, new technologies may reduce the demand for site leases. Also, owing to its expansive international presence, Crown Castle is highly exposed to foreign currency risks. Also, high customer concentration is a major drag for the company.

Earnings Whispers

Our proven model does not conclusively show that Crown Castle is likely to beat earnings 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. That is not the case here, as you will see below.

Zacks ESP: Crown Castle has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.13.

Zacks Rank: Though Crown Castle’s Zacks Rank #1 (Strong Buy) increases the predictive power of ESP, we need to have a positive ESP to be confident of an earnings surprise.

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

CROWN CASTLE Price and EPS Surprise

CROWN CASTLE Price and EPS Surprise | CROWN CASTLE Quote

Stock to Consider

Here’s a company that has the right combination of elements to post an earnings beat this quarter.

Windstream Holdings Inc. WIN, with an earnings ESP of +2.56% and a Zacks Rank #1.The company’s earnings surpassed the Zacks Consensus Estimate in all of the previous four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

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