Crown Castle International Inc. (CCI) declared excellent third quarter 2011 financial results, outperforming the Zacks Consensus Estimates. The solid performance was attributable to higher smartphone usage and increased deployment of 4G networks.
Third Quarter Highlights
Net revenue in the reported quarter was $513.9 million, up 6.6% year over year, and ahead of the Zacks Consensus Estimate of $507 million. This was mainly due to improved performance of the Site Rental segment.
Quarterly GAAP net income was approximately $43.7 million or 15 cents per share compared with a net loss of $140.2 million or a loss of 49 cents per share in the year-ago quarter. Third quarter 2011 EPS of 15 cents was well above the Zacks Consensus Estimate of 12 cents.
Gross margin in the reported quarter was 71.4% compared with 70.3% in the year-ago quarter. Operating income was $181.9 million compared with $156 million in the prior-year quarter. Quarterly adjusted EBITDA was approximately $332.4 million, up 8.6% year over year.
Agreements of Analysts
Of the 14 analysts covering the stock in the last 7 days, only one analyst revised the EPS estimate upward for the fourth quarter of 2011, while none revised their estimates downward for the same period.
In the last 7 days, none of the analysts revised their estimates for the first quarter of 2012.
However, for fiscal 2011, out of the 14 analysts covering the stock, only one analyst increased the EPS estimate while for fiscal 2012, none of the14 analysts revised their estimates in the last 7 days.
Currently, the Zacks Consensus earnings estimate for the fourth quarter of 2011 is pegged at 16 cents. The projected annual growth rate is 36.31%. Similarly, for the first quarter of 2012, the current Zacks Consensus earnings estimate of 17 cents indicates a year-over-year gain of 28.21%.
Magnitude of Estimate Revisions
For the fourth quarter of 2011 and first quarter of 2012, during the last 7 days, the Zacks Consensus Estimate remained unchanged at 16 and 17 cents, respectively. Likewise, for fiscal 2011 and 2012, the Zacks Consensus Estimates remained flat at 53 cents and 82 cents, respectively, in the last 7 days.
Earning Surprises
With respect to earnings surprises over the last four quarters, the company has produced an average earnings surprise of 31.88%. The ongoing quarter contains an upside potential (essentially a proxy for future earnings surprises) of 6.25% while the next quarter reflects 0.00% upside potential. Likewise, fiscal 2011 also remain at breakeven but fiscal 2012 contain downside risk of 2.44%.
Our Recommendation
Strong financial outlook and continuous share repurchase coupled with increased roll outs of 3G/4G high speed mobile voice, data, and video technology and higher smartphone usage will act as positive catalysts for the stock going forward. However, huge debt and stiff competition from American Tower Corp. (AMT) and SBA Communications Corp. (SBAC) will act as negative catalysts for the stock.
We, thus, maintain our long-term Neutral recommendation on Crown Castle. Currently, Crown Castle holds a Zacks #2 Rank, implying a short-term Buy rating.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/
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