On Aug 22, 2014, we issued an updated research report on
Crown Castle International
). Increased deployment of 4G LTE networks has propelled demand for
tower requirement by large carriers, which has encouraged the
company to raise its outlook for fiscal 2014.
Crown Castle has delivered positive earnings surprise in one of
the last four quarters, with an average surprise of negative 5.49%.
The company reported mixed financial results for the second quarter
of 2014 with the bottom line missing the Zacks Consensus Estimate
but the top line surpassing the same.
Crown Castle has a substantially leveraged balance sheet. At the
end of the second quarter of 2014, the company had nearly $11.5
billion of debt and a debt-to-capitalization ratio of 0.62. Owing
to the significantly high debt levels, the company may not be able
to generate sufficient cash to give shape to its annual capital
expenditure plans. Moreover, it will be difficult to raise more
debts in the near future.
Customer concentration is significantly high for Crown Castle.
Historically, the top four customers, namely, Verizon Wireless,
AT&T, Inc. (
), Sprint Corp. (
), and T-Mobile U.S. accounted for nearly 84% of Crown Castle's
total revenue, of which AT&T contributes nearly 26% of its site
rental revenues. Thus, loss of any of these customers or
consolidation among them will significantly affect the company's
Consolidation in the wireless industry may reduce demand for
cell tower deployments and therefore is expected to have an adverse
effect on Crown Castle's top line. Also, the company's expansive
international presence exposes it to currency exchange rate risks.
Meanwhile, the stock is overvalued at current levels and is trading
at the high-end of its 52-week price range.
Crown Castle currently carries a Zacks Rank #3 (Hold). Another
stock in this sector that warrants a look is CommScope Holding
Company, Inc. (
) with a Zacks Rank #1 (Strong Buy).
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