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What Makes Crown Castle Stock a Solid Pick for Your Portfolio Now?
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Crown Castle (CCI - Free Report) owns a portfolio of wireless communication infrastructure assets in the United States. As wireless data consumption is expected to increase significantly over the next few years, service providers are likely to continue their network expansion and densification efforts to meet this incremental demand, driving demand for CCI’s properties. A healthy balance sheet position is likely to support its growth endeavors.
Analysts, too, seem bullish on this Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for its 2024 and adjusted funds from operations (AFFO) per share has been raised over the past months to $6.97.
Shares of the company have risen 11.1% in the past six months compared with the industry’s growth of 15.2%. Given the rise in wireless connectivity usage and the secular trends of the industry, there is immense scope for growth, and with CCI’s strategically located assets, it is expected to perform well in the quarters ahead. Hence, there is decent room for this stock’s growth.
Image Source: Zacks Investment Research
Factors That Make Crown Castle a Solid Pick
Healthy Industry Fundamentals & Solid Property Base: The exponential growth in mobile data usage, higher availability of spectrum and deployment of 5G networks at scale are driving significant network investments by carriers who aim to improve and densify their cell sites. Wireless data consumption is expected to increase considerably over the next several years, driven by the advent of next-generation technologies, including edge computing functionality, autonomous vehicle networks and the Internet of Things, and the rampant usage of network-intensive applications for video conferencing and cloud services and hybrid-working scenarios.
Given Crown Castle’s unmatched portfolio of more than 40,000 towers in each of the top 100 basic trading areas of the United States and approximately 90,000 route miles of fiber (as of the second quarter of 2024), it remains well-positioned to capitalize on this upbeat trend. The company’s investments in fiber and small cell business on the back of acquisitions, constructions and new deployments complement its tower business and offer meaningful upside potential to its 5G growth strategy.
Management remains on track to deliver 2024 organic revenue growth of 4.5% in towers, 2% in fiber solutions and double digits in small cells, adjusted for the impact of Sprint Cancellations. The company expects 11,000 to 13,000 new billable nodes in 2024 compared to 8,000 nodes in 2023.
Resilient Business Model: Crown Castle’s strong internally generated cash flow, supported by its tower and fiber segments, is impressive. The company has long-term tower lease agreements with top U.S. carriers, which contribute to recurring site rental cash flows over the long term.
The wireless tenant contracts have an initial term of five to 15 years with contractual escalators and multiple renewal periods of five to 10 years each, which the tenant can exercise at their discretion. The initial term for the fiber solutions tenant contracts varies between three to 20 years.
Such long-term leases enable the company to enjoy recurring revenues that provide top-line stability, while contracted rent escalators on the majority of its revenues offer embedded growth. A strong and creditworthy tenant base adds resiliency to its business.
Balance Sheet Strength & ROE: Crown Castle has sufficient liquidity and a decent balance sheet position. The company exited the second quarter of 2024 with cash and cash equivalents of $155 million. As of June 30, 2024, the net debt to last quarter’s annualized adjusted EBITDA was 5.9X. It has only 8% of its debt maturing through 2025. Its weighted average term to maturity is seven years.
Crown Castle has enjoyed historical cash flow growth of 8.30% compared with 2.57% of the industry. This REIT’s trailing 12-month return on equity (ROE) highlights its growth potential. CCI’s ROE is 19.20% compared with the industry’s average of 3.26%. This reflects that the company reinvests more efficiently compared with the industry.
Dividend Payout: Solid dividend payouts are the biggest enticements for REIT shareholders, and Crown Castle is committed to that. It has increased its dividend four times in the last five years, and its five-year annualized dividend growth rate is 7.66%.
Given that Crown Castle’s dividends are supported by high-quality, long-term contracted lease payments, and it benefits from being a provider of mission-critical shared communication infrastructure assets, we expect the dividend payout to be sustainable over the long run.
The Zacks Consensus Estimate for Cousins Properties’ 2024 FFO per share has been raised marginally over the past month to $2.67.
The Zacks Consensus Estimate for Lamar Advertising’s current-year FFO per share has moved marginally north in the past two months to $8.09.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Crown Castle (CCI - Free Report) owns a portfolio of wireless communication infrastructure assets in the United States. As wireless data consumption is expected to increase significantly over the next few years, service providers are likely to continue their network expansion and densification efforts to meet this incremental demand, driving demand for CCI’s properties. A healthy balance sheet position is likely to support its growth endeavors.
Analysts, too, seem bullish on this Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for its 2024 and adjusted funds from operations (AFFO) per share has been raised over the past months to $6.97.
Shares of the company have risen 11.1% in the past six months compared with the industry’s growth of 15.2%. Given the rise in wireless connectivity usage and the secular trends of the industry, there is immense scope for growth, and with CCI’s strategically located assets, it is expected to perform well in the quarters ahead. Hence, there is decent room for this stock’s growth.
Image Source: Zacks Investment Research
Factors That Make Crown Castle a Solid Pick
Healthy Industry Fundamentals & Solid Property Base: The exponential growth in mobile data usage, higher availability of spectrum and deployment of 5G networks at scale are driving significant network investments by carriers who aim to improve and densify their cell sites. Wireless data consumption is expected to increase considerably over the next several years, driven by the advent of next-generation technologies, including edge computing functionality, autonomous vehicle networks and the Internet of Things, and the rampant usage of network-intensive applications for video conferencing and cloud services and hybrid-working scenarios.
Given Crown Castle’s unmatched portfolio of more than 40,000 towers in each of the top 100 basic trading areas of the United States and approximately 90,000 route miles of fiber (as of the second quarter of 2024), it remains well-positioned to capitalize on this upbeat trend. The company’s investments in fiber and small cell business on the back of acquisitions, constructions and new deployments complement its tower business and offer meaningful upside potential to its 5G growth strategy.
Management remains on track to deliver 2024 organic revenue growth of 4.5% in towers, 2% in fiber solutions and double digits in small cells, adjusted for the impact of Sprint Cancellations. The company expects 11,000 to 13,000 new billable nodes in 2024 compared to 8,000 nodes in 2023.
Resilient Business Model: Crown Castle’s strong internally generated cash flow, supported by its tower and fiber segments, is impressive. The company has long-term tower lease agreements with top U.S. carriers, which contribute to recurring site rental cash flows over the long term.
The wireless tenant contracts have an initial term of five to 15 years with contractual escalators and multiple renewal periods of five to 10 years each, which the tenant can exercise at their discretion. The initial term for the fiber solutions tenant contracts varies between three to 20 years.
Such long-term leases enable the company to enjoy recurring revenues that provide top-line stability, while contracted rent escalators on the majority of its revenues offer embedded growth. A strong and creditworthy tenant base adds resiliency to its business.
Balance Sheet Strength & ROE: Crown Castle has sufficient liquidity and a decent balance sheet position. The company exited the second quarter of 2024 with cash and cash equivalents of $155 million. As of June 30, 2024, the net debt to last quarter’s annualized adjusted EBITDA was 5.9X. It has only 8% of its debt maturing through 2025. Its weighted average term to maturity is seven years.
Crown Castle has enjoyed historical cash flow growth of 8.30% compared with 2.57% of the industry. This REIT’s trailing 12-month return on equity (ROE) highlights its growth potential. CCI’s ROE is 19.20% compared with the industry’s average of 3.26%. This reflects that the company reinvests more efficiently compared with the industry.
Dividend Payout: Solid dividend payouts are the biggest enticements for REIT shareholders, and Crown Castle is committed to that. It has increased its dividend four times in the last five years, and its five-year annualized dividend growth rate is 7.66%.
Given that Crown Castle’s dividends are supported by high-quality, long-term contracted lease payments, and it benefits from being a provider of mission-critical shared communication infrastructure assets, we expect the dividend payout to be sustainable over the long run.
Other Stocks to Consider
Some other top-ranked stocks from the REIT sector are Cousins Properties (CUZ - Free Report) and Lamar Advertising (LAMR - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Cousins Properties’ 2024 FFO per share has been raised marginally over the past month to $2.67.
The Zacks Consensus Estimate for Lamar Advertising’s current-year FFO per share has moved marginally north in the past two months to $8.09.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.