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Will Crown Castle (CCI) Disappoint Investors in Q1 Earnings?

Zacks

Crown Castle International Corp. CCI, a leading wireless communication tower operator in the U.S., is scheduled to report first-quarter 2017 financial numbers on Apr 24, after market close.

Last quarter, the company posted a positive earnings surprise of 3.60%. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in two of the past four quarters, with an average beat of 3.44%.

The price performance of Crown Castle was also impressive over the past three months. The stock added 11.2%, outshining the Zacks categorized REIT- Equity Trust Other industry’s gain of 6.0% over the same time frame.


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

Factors at Play

Crown Castle’s continuous operation in a consolidated wireless industry has reduced demand for cell tower deployment and is therefore expected to dent Crown Castle’s top line considerably. Further, new technologies have reduced demand for site leases. Also, owing to its expansive international presence, Crown Castle remains exposed to foreign currency exchange rate risks. High customer concentration is also a concern.

On the other hand, Crown Castle’s extensive tower portfolio, increased demand for infrastructure, strong business outlook, healthy leasing activity, continued acquisition of towers and growing demand for mobile broadband have acted as major positives for the coma. Wireless services are rapidly gaining ground based on technological advancements and network upgrade.

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, AT&T Inc. T and T-Mobile US Inc. TMUS. Crown Castle had acquired 9,700 wireless towers from AT&T and taken over 7,200 wireless towers of T-Mobile US.

We further look forward to see how Crown Castle’s ongoing efforts to reposition itself from being a tower company to a fiber provider (focused on the small cell opportunity) through the purchase of several fiber operators will influence its upcoming quarterly results.

We are also impressed with Crown Castle’s continued efforts to reward its shareholders with a quarterly cash dividend of 95 cents per common share. The quarterly dividend will be paid on Mar 31, 2017 to stockholders of record at the closure of business on Mar 17, 2017.

Earnings Whispers

Our proven model does not conclusively show that Crown Castle is likely to beat on 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 $1.16. You can uncover the best stocks to buy or sell before they’re reported with ourEarnings ESP Filter.

Zacks Rank: Crown Castle has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

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

Key Pick

American Tower Corporation AMT from the Zacks categorized broader Finance sector has the right combination of elements to post an earnings beat when it is scheduled to report its first-quarter 2017 results on Apr 27. American Tower has an Earnings ESP of +1.33% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company’s earnings surpassed the Zacks Consensus Estimate in all of the previous four quarters, with an average beat of 6.82%

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