Crown Castle International Corporation (CCI) reported mixed financial results for the second quarter of 2014 with its bottom line missing the Zacks Consensus Estimate and the top line surpassing the same. However, despite the earnings miss, the company raised its outlook for fiscal 2014.
Net Profit
Quarterly GAAP net income came in at approximately $35.4 million or 7 cents per share compared with $53.4 million or 18 cents per share in the year-ago quarter. Reported earnings per share also missed the Zacks Consensus Estimate of 16 cents.
Revenues
Net revenue in the quarter increased 25% year over year to $916 million, outpacing the Zacks Consensus Estimate of $869 million. This was mainly due to improved performance at both the Site Rental and the Network Services segments.
Margins
Gross margin in the second quarter was 62.8% compared with 66.1% in the year-ago quarter. Operating income was $230.2 million against $230 million in the prior-year quarter. Quarterly adjusted EBITDA was approximately $531 million, representing a year-over-year increase of 19%.
Cash Flow
During the second quarter of 2014, funds flow from operations (FFO) was $276 million versus $243 million in the prior-year quarter. FFO per share in the reported quarter stood at 83 cents, unchanged from the year-ago quarter. Quarterly adjusted funds flow from operations (AFFO) was $351 million compared with $273 million in the prior-year quarter. AFFO per share in the reported quarter was $1.05 against 93 cents in the year-ago period.
Balance Sheet
At the end of the second quarter of 2014, Crown Castle had cash & marketable securities of approximately $227.5 million on its balance sheet compared with $223.4 million at the end of 2013. Total debt was approximately $11,464.6 million versus $11,490.9 million at the end of 2013. The debt-to-capitalization ratio stood at 0.62, unchanged from the end of 2013.
Site Rental Segment
Quarterly revenues were $746 million, up 21% year over year. Gross margin for the segment was 68.2% compared with 70.9% in the prior-year quarter.
Network Services Segment
Quarterly revenues were $170 million, up 44% year over year. Gross margin for the segment was 39.1% versus 40.5% in the prior-year quarter.
Management Outlook for Third-Quarter of 2014
For the third quarter, Crown Castle expects Site Rental revenues in the range of $746 to $751 million, up from the previous estimate of $740–$745 million. Site Rental cost of operation is projected in the band of $237 to $242 million. Adjusted EBITDA is anticipated between $521 million and $526 million. Site Rental gross margin is expected between $506 and $511 million. Interest expense (inclusive of amortization) is estimated in the $139–$144 million range. FFO is expected in the band of $337–$342 million. AFFO is projected in the $332–$337 million range. Net income is forecasted in the range of $81–$114 million or 24–34 cents per share.
Management Outlook for Full Year 2014
In 2014, Crown Castle expects Site Rental revenues in the range of $2,990– $3,000 million. Site Rental cost of operation is projected in the $933–$943 million band. Site Rental gross margin is expected between $2,052 million and 2,062 million. Adjusted EBITDA is anticipated between $2,100 and $2,115 million. Interest expense (inclusive of amortization) is estimated in the $569–$579 million range. FFO is projected in the range of $1,286–$1,301 million. AFFO is expected between $1,376 and $1,391 million. Net income is anticipated between $292 and $376 million.
Other Stocks to Consider
Crown Castle carries a Zacks Rank #5 (Strong Sell). Other better-ranked stocks in this sector include CommScope Holding Company, Inc. (COMM), Equinix, Inc. (EQIX) and Comtech Telecommunications Corp. (CMTL). CommScope Holding and Comtech Telecommunications sport a Zacks Rank #1 (Strong Buy), whereas Equinix holds a Zacks Rank #2 (Buy).
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