Crown Castle International Corporation (CCI) reported robust financial numbers for the third quarter of 2014 with both its top and bottom line surpassing the respective Zacks Consensus Estimate. The company also raised its quarterly dividend buoyed by better-than-expected quarterly numbers.
Quarterly net income came in at approximately $95.9 million or 29 cents per share compared with $45.8 million or 16 cents per share in the year-ago quarter. The earnings figure surpassed the Zacks Consensus Estimate of 27 cents.
Net revenue in the quarter increased 24% year over year to $930 million, outpacing the Zacks Consensus Estimate of $921 million. This was mainly due to improved performance at both the Site Rental and the Network Services segments.
Gross margin in the third quarter was 63% compared with 64.8% in the year-ago quarter. Operating income was $250.3 million against $222.8 million in the prior-year quarter. Quarterly adjusted EBITDA was approximately $533 million, representing a year-over-year increase of 21%.
Cash Flow
During the third quarter of 2014, funds flow from operations (FFO) was $351 million versus $242 million in the prior-year period. FFO per share in the reported quarter stood at $1.05, up 27% year over year. Quarterly adjusted funds flow from operations (AFFO) was $350 million compared with $271 million in the third quarter of 2013. 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 quarter under review, Crown Castle had cash and cash equivalents of approximately $238.6 million on its balance sheet compared with $223.4 million at the end of 2013. Debt and other long-term obligations was approximately $11,467 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.
Segment Details
Site Rental Segment
Quarterly revenues were $752 million, up 21% year over year. Gross margin for the segment was 70% compared with 70.7% in the prior-year quarter.
Network Services Segment
Quarterly revenues were $178 million, up 38.9% year over year. Gross margin for the segment was 42.2% versus 36% in the prior-year quarter.
Management Outlook for Fourth-Quarter 2014
For the fourth quarter, Crown Castle expects Site Rental revenues in the range of $755 million to $760 million. Site Rental cost of operation is projected in the band of $234 to $239 million. Adjusted EBITDA is anticipated between $538 million and $543 million. Site Rental gross margin is expected between $519 and $524 million. Interest expense (inclusive of amortization) is estimated in the $138–$143 million range. FFO is expected at $353–$358 million. AFFO is projected in the $346–$351 million range. Net income is forecasted at $97–$130 million or 29–39 cents per share. Net income attributable to CCIC common shareholders is estimated to be in the range of $84 to $121 or $0.25 to $0.36 per share.
Management Outlook for Full Year 2014
In 2014, Crown Castle expects Site Rental revenues in the range of $3,001– $3,006 million. Site Rental cost of operation is projected in the $940–$945 million band. Site Rental gross margin is expected between $2,058 million and 2,063 million. Adjusted EBITDA is anticipated between $2,128 and $2,133 million. Interest expense (inclusive of amortization) is estimated in the $571–$576 million range. FFO is projected at $1,317–$1,322 million. AFFO is expected between $1,396 and $1,401 million. Net income is anticipated between $342 and $375 million or $1.03 and $1.13 per share. Net income attributable to CCIC common shareholders is estimated to be in the range of $300 to $337 or 0.90 to $1.01 per share.
Management Outlook for Full Year 2015
In 2015, Crown Castle expects Site Rental revenues in the range of $3,047– $3,067 million. Site Rental cost of operation is projected in the $964–$979 million band. Site Rental gross margin is expected between $2,073 million and 2,093 million. Adjusted EBITDA is anticipated between $2,126 and $2,146 million. Interest expense (inclusive of amortization) is estimated in the $521–$536 million range. FFO is projected at $1,429–$1,449 million. AFFO is expected between $1,437 and $1,457 million. Net income is anticipated between $428 and $512 million or $1.28 and $1.54 per share. Net income attributable to CCIC common shareholders is estimated to be in the range of $382 to $474 or $1.15 to $1.42 per share.
Zacks Rank
Crown Castle carries a Zacks Rank #3 (Hold). Better-ranked stocks in this sector include QUALCOMM Incorporated (QCOM), Dish Network Corp. (DISH) and Sonus Networks, Inc. (SONS). QUALCOMM sports a Zacks Rank #1 (Strong Buy), whereas Dish Network and Sonus Networks hold a Zacks Rank #2 (Buy).
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