On Dec 4, we maintained our Neutral recommendation on
Crown Castle International Inc.
), as the company reported mixed financial results with the
bottom line missing the Zacks Consensus Estimate but the top line
surpassing the same.
Why Maintained at Neutral?
Higher usage of smartphones and tablets and increased deployment
of 4G LTE networks have propelled demand for tower requirement by
large carriers. Moreover, the acquisition of NextG Networks Inc.
(which comprises 7,000 Distributed Antenna Systems) and the
purchase of 7,200 wireless towers from
) have made it the largest wireless tower operator in the
Furthermore, the company has entered into a definitive
agreement with telecom giant AT&T Inc. to acquire exclusive
rights of 9,700 wireless towers of the latter for a total
consideration of $4.85 billion
As transporting equipment from one tower to another is
cumbersome, carriers normally renew contracts upon expiration.
This implies that a high percentage of Crown Castle's revenue is
Recently, the company decided to convert its tower business into
a Real Estate Investment Trust (REIT). An REIT status will
benefit the company in terms of tax savings and enhance long-term
shareholders wealth. Moreover, it will minimize the weighted
average cost of capital (WACC). Following the conversion, Crown
Castle will distribute 90% of its earnings through dividends
every year, reducing tax.
However, a highly leveraged balance sheet and the ongoing merger
deals with large telecom carriers may act as headwinds for the
company going forward. Moreover, Crown Castle is currently
trading at a 52-week high.
Crown Castle carries a Zacks Rank #3 (Hold).
Other Stocks Outlook in Related Industries
Other stocks in this sector like
American Tower Corp.
SBA Communications Corp.
) are set to gain from the robust growth of LTE deployment in the
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