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Crown Castle’s Q3 2018 Earnings Driven by 5G, Mobile, Internet

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Nov. 20 2020, Updated 12:26 p.m. ET

Third-quarter expectations

Crown Castle International (CCI) is scheduled to report its third quarter of 2018 results on October 17. According to Wall Street estimates, its revenues and AFFO (adjusted funds from operations) per share could have a robust YoY (year-over-year) growth. Analysts project AFFO at $1.38 per share, up 34% YoY and 5.3% sequentially. Revenues are anticipated to grow 27.2% YoY and 1.7% sequentially to $1.35 billion.

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On July 19, in its second-quarter conference call, Crown Castle provided guidance for the third quarter. It projected site rental revenue of $1.17 billion–$1.18 billion and AFFO of $568 million–$578 million. It projected net income of $126 million–$151 million and adjusted EBITDA of $785 million–$795 million.

Wall Street analysts’ expectations for site rental revenue, AFFO, net income, and adjusted EBITDA are $1.18 billion, $574.21 million, $114.11 million, and $786.46 million, respectively.

Driving factors

Crown Castle’s third-quarter results are well poised to benefit from its portfolio of shared communication infrastructure assets. Its strategically located portfolio of more than 40,000 towers, 50,000 small cells, and 60,000 route miles of high-capacity fiber assets are expected to have strong leasing activity in the third quarter.

Accelerated 5G (fifth-generation) deployments by domestic wireless network carriers, the mobile industry’s continuous evolution, and rising Internet use are driving the demand for communication sites, primarily for small cells.

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Archrival American Tower (AMT), in its first-quarter 2018 earnings conference call, revealed that US wireless carriers T-Mobile (TMUS), Verizon Communications (VZ), and AT&T (T) are expected to incur capex of ~$30 billion in 2018 on infrastructure buildouts. A considerable portion of that will go to tower expansion.

Crown Castle’s sustained focus on expanding its small-cell footprint across major markets is likely to keep driving its top and bottom lines. According to Wintergreen Research, the small-cell market is expected to grow from $12.5 billion to $58.7 billion between 2017 and 2024 at a compound annual growth rate of 24.7%.

Rising interest rates may somewhat offset the company’s third-quarter bottom-line growth expectations. The Fed has raised interest rates three times so far this year by 25 basis points each. It expects to raise the rate one more time this year. To remain competitive, Crown Castle has to continually invest in infrastructure build-outs and communication site buyouts, relying on debt for both.

Crown Castle makes up ~15% of the Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR).

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