“So, it’s not shocking that Wednesday’s report from Crown Castle was a largely ho hum affair,” said Nick Del Deo of MoffettNathanson. “The top line was about as expected ex-straight-line; same for the bottom line excluding some cost items,” Del Deo said. “Forget straight-line and 2019 guidance is effectively unchanged.”
Del Deo noted Crown Castle’s shares have, “meaningfully underperformed” those of its peers over the past few years and has not organically grown its tower unit at the same pace. For example, since the end of 2015, Crown Castle’s stock has returned a cumulative 43 percent (inclusive of dividends) whereas American Tower’s is up 81 percent and SBA’s 66 percent, he observed.
“Part of this underperformance is operational (likely the largest contributor), part is likely financing related – the company has poured money into small cell builds, diluting current returns and funding them, in part, with equity raises,” he said. “Part likely stems from views on capital allocation – while plenty of investors like fiber and small cells, few like them as much as towers and aren’t willing to apply the same multiple.”
Analyst Robert Gutman with Guggenheim said, “Site leasing revs came in 1.3 percent ahead of our estimate while Adj. EBITDA was 1.2 percent below due to extraordinary expense and ~$5MM of services activity pushed into 2019. Offset by lower restructuring costs, Q4 AFFOps of $1.42 came in just a penny below our estimate. 2019 guidance was adjusted to reflect straight-line adjustments from term extensions, while underlying net organic growth expectations remain unchanged.”
Jennifer Fritzsche, Senior Analyst at Wells Fargo Securities, called the results “mixed,” noting the revenue beat was offset by slightly weaker EBITDA and AFFO. The company was negatively impacted by additional 2018 incentive accruals and natural disasters (namely Hurricane Michael and the California wildfires), according to Fritzsche, as well as lower than expected services contribution, all of which was limited to Q4.
“CCI highlighted elevated tower leasing in 2H 2018 and without naming specific carriers, expects it to accelerate new tower leasing throughout 2019 y/y,” she said. “The company deployed a record number of small cell nodes in 2018 (~7K), noted it plans to deploy 10-15K more nodes in 2019, with +20K additional in the pipeline for 2020 and beyond.”
Fritzsche noted CCI raised its outlook for 2019 revenue and EBITDA, largely driven by the increase in straight-line revenue from higher new leasing activity, and reiterated its guide for AFFO.
“We continue to believe in CCI’s strategy of offering towers, small cells and fiber services as a turnkey solution for wireless carriers,” she said “and would point to continued organic growth and new leasing expectations as evidence of its effectiveness. CCI remains our top pick of the towers group and we reiterate our Outperform rating on the shares.”
January 25, 2019
Reader Interactions