CCI is Solid but New Street Research Still Prefers SBA

Crown Castle reported their second quarter earnings last week and raised full year guidance because of leasing strength from small cells and macro site. “[This] should bode well for SBAC and AMT. We continue to like the towers and see the greatest upside at SBAC,” Spencer Kurn at New Street Research wrote. “After three quarters of declining capex at carriers, it appears that we have finally reached the inflection point where capex (and tower revenue) is starting to rise.” Verizon also reported their second quarter earnings last week, and reported a sharp increase in capex, which Kurn believes will benefit towers. The rising carrier activity, and CCI’s reports of macro sites playing a meaningful role in the company’s guidance, gives Kurn reason to believe that this will be positive for the other two public tower companies: AMT and SBAC. “There is likely more upside to guidance if carrier capex continues to ramp throughout the year (as we expect) and if Sprint discloses details of their new network plan on their upcoming earnings call. While CCI will benefit from improving trends, we see the greatest upside at SBAC because they have better assets (with fewer MLAs), better capital allocation, and greater financial leverage,” Kurn wrote. New Street Research has raised their 2015 cash site leasing revenue estimates for CCI by 0.1% and tower cash flow by 0.3%. They also maintain their $87 price target on the company. If CCI’s multiple expanded and traded at a 3% dividend yield, there could be upside to $109.