Will Crown Castle (CCI) Disappoint Investors In Q3 Earnings?

Crown Castle International Corp (NYSE:CCI) , a leading wireless communication tower operator in the United States, is scheduled to report third-quarter 2017 financial numbers on Oct 19, after market close.

Last quarter, the company reported a negative earnings surprise of 1.64%. Moreover, the company’s earnings lagged the Zacks Consensus Estimate in two of the past four quarters, with an average miss of 0.19%.

The price performance of Crown Castle has been impressive in the past three months. The stock has returned 5.9% compared with the industry’s gain of 0.7% over the same time frame.

Let’s see how things are shaping up for this announcement.

Factors at Play

Crown Castle’s ongoing operation in a consolidated wireless industry has reduced demand for cell tower deployment. This is expected to dent Crown Castle’s top line considerably. Further, new technologies have reduced demand for site leases.

Also, customer concentration is very high for Crown Castle, with the top four players as its customers, namely, Verizon Wireless, AT&T Inc (NYSE:T) , Sprint, and T-Mobile US Inc (NYSE:T) , accounting for majority of its total revenue. Loss of any of these customers or consolidation among them will significantly affect the company’s top-line Concentration, which is a concern.

Crown Castle’s extensive tower portfolio, increased demand for infrastructure, strong business outlook, healthy leasing activity, continued acquisition of towers and growing demand for mobile broadband have acted as major positives for the company. Wireless services are rapidly gaining popularity through technological advancements and network upgrade.

Much of the infrastructure and upgrades require effective site management of cell towers and equipment. Crown Castle effectively addresses this opportunity as over 90% of its quarterly revenues come from wireless service providers like Verizon Communications (NYSE:VZ), AT&T and T-Mobile US. Crown Castle had acquired 9,700 wireless towers from AT&T and taken over 7,200 wireless towers of T-Mobile US.

In the last reported second-quarter 2017, Crown Castle unveiled its expected Site Rental revenues for third-quarter 2017 in the range of $888-$893 million. The Zacks Consensus Estimate for the same is $891 million.

We wait to see how Crown Castle’s ongoing efforts to reposition itself from a tower company to a fiber provider (focused on the small-cell opportunity) through the purchase of several fiber operators will influence its upcoming quarterly results.

We are impressed with Crown Castle’s continued efforts to reward its shareholders with a quarterly cash dividend of $18.14 per share of preferred stock, payable on Nov 1, 2017, to common stockholders of record at the close of business on Oct 15, 2017.

Earnings Whispers

Our proven model does not conclusively show that Crown Castle is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Crown Castle has an Earnings ESP of -3.52%. This is because the Most Accurate estimate is at $1.12 while the Zacks Consensus Estimate is pegged at $1.16. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Crown Castle has a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Key Pick

Welltower Inc (NYSE:HCN) , from the broader Finance sector, has the right combination of elements to post an earnings beat when it expectedly reports third-quarter 2017 results on Nov 1. The company has an Earnings ESP of +0.06% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average beat of 0.92%

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