Colby Synesael, Cowen
“High End of Guidance, Lack of Increase in New Leasing”
“Crown reported 3Q17 site rental revenue/EBITDA toward the high end of guidance with upside AFFO driven primarily by higher than expected interest income as well as sustaining capex at the low end of the range,” Synesael said. “For 2017 the company increased site rental revenue to reflect the 3Q17 beat, but maintained EBITDA guidance as a result of an estimated $8MM in 1x hurricane costs of which >50% will be in 4Q17 while AFFO/share was reduced to reflect the Lightower financing, otherwise it too remained flat.”
“We view initial 2018 guidance as good,” Synesael said, “but the lack of increase in tower new leasing activity shows how dependent Crown (and the other tower operators) are on FirstNet for accelerating tower growth.”
Nick Nick Del Deo, MoffettNathanson
“Reasons to be Optimistic, and Reasons to be Cautious”
“It may be the least insightful insight in all of Towerland: growth is going to accelerate in 2018 relative to 2017,” Del Deo said. “More than any other single reason, it’s why the stocks have surged since bottoming out in the wake of the election. Between FirstNet (AT&T), AWS-3 (AT&T, Verizon, T-Mobile), WCS (AT&T), 600 MHz (T-Mobile), unlimited plans (all of them), and even Sprint (Sprint!) saying it plans to start adding macrosites again, the outlook for tower leasing activity appears quite robust. But anyone with even a passing acquaintance to the U.S. wireless industry knows this. It’s already in the stocks,” he said.
“What we don’t know is just how in the stocks it is,” according to Del Deo. “And what will matter as the Big Three disclose their 2018 guidance is how that guidance compares to an expectation that we can’t quantify. There are reasons to be optimistic, and reasons to be cautious, and reasons why Crown Castle’s guide may not be as informative as we hope,” he said.
“Crown Castle is always the first of the towers to report earnings each quarter, and the only to disclose guidance for the following year with Q3 rather than Q4 earnings,” Del Deo said. “ That means it does so with the least amount of visibility. These companies have been pretty good at the beat-and-raise game and don’t want to miss. Lowered visibility and a desire to raise guidance throughout the year will both naturally drive Crown Castle to be conservative.”
Spencer Kurn, New Street Research
“Positive for the Tower Sector. Acceleration in New Leasing Activity”
“CCI provided a first-look at 2018 leasing activity and the read-through is positive for the U.S. tower sector,” Kurn said. “CCI guided to an acceleration in new leasing activity (versus our expectations for a flat guide); and, importantly, the elevated activity does not include any impact from FirstNet. FirstNet now stands as a clear source of additional upside to guidance next year.”
“Guidance now sits modestly below Consensus estimates;” Kurn said, “however, we don’t expect estimates to move down because it is well understood that management tends to guide conservatively at the start of the year. We remain buyers of the towers.”
October 20, 2017