It seems to be a wise decision to add Crown Castle International Corp. CCI, given its continued efforts to diversify business from a tower operator to a fiber provider. Moreover, amid growing demand for data volume and deployment of 5G network, wireless carriers are expanding and enhancing their networks. These positive trends will drive demand for the company’s communications infrastructure assets.
Crown Castle not only witnessed year-over-year growth in funds from operations (FFO) per share in the fourth quarter, but has also been witnessing upward estimate revisions, reflecting analysts’ optimism about its prospects. Over the last 30 days, the Zacks Consensus Estimate for 2019 FFO per share has marginally moved north.
The company’s price performance also seems impressive. In fact, this Zacks Rank #2 (Buy) stock has gained around 13.5% over the past six months, outperforming 9.1% growth recorded by the industry.
Notably, Crown Castle has a number of other aspects that make it a solid investment choice.
Why the Stock is an Attractive Pick
Portfolio-repositioning efforts: Crown Castle is shifting its focus from tower assets to become a fiber provider with greater emphasis on the small-cell opportunity. In line with this, the company is acquiring several fiber operators and deploying small cells in its assets. It witnessed the highest small-cell deployment in 2018 and expects to install another 10,000-15,000 nodes in the current year. In 2018 and 2017, the company invested $1.2 billion and $25 million in its fiber segment, respectively. These efforts will strengthen Crown Castle’s position as one of the largest fiber network operators in the United States.
Revenue strength: Crown Castle’s business model enables it to enjoy steady revenues. In fact, it has long-term (typically 5-15 years) tower lease agreements with the top four U.S. carriers, which account nearly 74% of its revenues. Further, robust growth in site rental revenues is backed by strong leasing activity and contracted tenant escalations. Additionally, the company’s projected sales growth (F1/F0) of 5.6% (the industry average being 3.1%) indicates constant upward momentum in revenues.
Favorable industry tailwinds: The deployment of 5G will drive growth on both the company’s tower and small-cell assets as wireless carriers are increasing investments to enhance their networks to provide the coverage, capacity and speed needed to support mobile video, Internet of Things (IoT) and fixed wireless broadband. Moreover, wireless data consumption is expected to shoot up considerably over the next several years, driven by increased innovation and adoption of data-driven mobile devices, and applications such as machine-to-machine (M2M) connections, social networking and streaming of video. Crown Castle’s extensive portfolio of towers and small cells has the network density required to meet such demands.
Encouraging FFO picture: Alexandria witnessed FFO per share growth of 7.03% over the last three to five years, higher than the industry average of 4.32%. In addition, this uptrend is likely to continue in the near term as reflected by its projected FFO growth rate of 7.2% for 2019 (higher than the industry average of 1.6%). Further, management anticipates FFO in the $2,293-$2,338 million band, while AFFO is projected at $2,413-$2,458 million. This outlook reflects robust demand for the company’s tower and fiber assets.
Other Stocks to Consider
Investors can also consider other similarly-ranked stocks from the same space like Terreno Realty Corporation TRNO, Cousins Properties Incorporated CUZ and Boston Properties, Inc. BXP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Terreno Realty’s FFO per share estimates for 2019 remained unchanged at $1.42, in the past month. Furthermore, it has a long-term growth rate of 8.40%.
Cousins Properties’ Zacks Consensus Estimate for 2019 FFO per share has been revised upward 15.9% to 73 cents in the past month. Also, it has a long-term growth rate of 3.2%.
Boston Properties’ FFO per share estimate for the ongoing year has been revised marginally north to $6.92 in 30 days’ time. Additionally, it has a long-term growth rate of 6.20%.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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