Neutral Stance on Crown Castle - Analyst Blog

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On Dec 4, we maintained our Neutral recommendation on Crown Castle International Inc. ( CCI ), 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 T-Mobile USA ( TMUS ) have made it the largest wireless tower operator in the U.S.

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 recurring.

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. ( AMT ), ADTRAN Inc. ( ADTN ) and SBA Communications Corp. ( SBAC ) are set to gain from the robust growth of LTE deployment in the upcoming days.



ADTRAN INC (ADTN): Free Stock Analysis Report

AMER TOWER CORP (AMT): Free Stock Analysis Report

CROWN CASTLE (CCI): Free Stock Analysis Report

SBA COMM CORP (SBAC): Free Stock Analysis Report

T-MOBILE US INC (TMUS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ADTN , AMT , CCI , SBAC , WACC

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