Crown Castle International’s first quarter results were in line with its expectations for the year, with a 6 percent increase in site rental revenues, an 84 percent increase in net income, 8 percent increase in Adjusted EBITDA and 9 percent increase in AFFO.
“In the first quarter, we delivered solid results that were in line with our expectations, positioning us well to generate attractive growth in cash flows and dividends per share for the full year 2019,” stated Jay Brown, Crown Castle’s CEO. “This continued growth reflects the strong fundamentals we see across our business, including our major customers spending to improve their current networks while beginning to invest in 5G.”
Analysts, many of whom believe the tower stock prices will not go much higher, were not overly impressed.
Deutsche Bank Research
We continue to like Tower fundamentals and view CCI as our preferred idea (and top 5G beneficiary) among the group. However, our recent downgrade to Hold reflects lack of upside to our 2019YE price target ($121) and broader concerns around valuation. For context, CCI trades at 21x 2019E P/AFFO; this is at the high end of its historical range (17x-21x), despite a business mix incrementally skewing towards Fiber (relative to Towers) in recent years.
Nick Del Deo
Q1 2019 numbers were generally consistent with expectations, as is typically the case, though towers were a bit stronger than we expected and fiber / small cells softer, with network services contributing more than expected. Instead, we’d note that growth remains below that of its peers when considered on an apples-to-apples basis, the company has a meaningful contribution from non-tower assets, and its reported results require the greatest adjustments to derive its underlying economic results.
Wells Fargo Securities
CCI reported solid Q1 2019 results. Organic revenue growth was a tad light of our expectations, but considering the company reiterated its 2019 guide, we suspect activity was in-line with CCI’s expectations and look for an increased benefit in the balance of 2019. As presented in our 4/15 downgrade of the towers sector, we suspected the towers were pricing in a “beat and raise” story throughout 2019.
New Street Research
Site leasing revenue and EBITDA were in-line. AFFO beat on lower sustaining capex, but this will be offset by higher capex in subsequent quarters. Guidance was unchanged, which is modestly disappointing since CCI has tended to raise guidance at this point in the year. No material changes to estimates or thesis. We continue to see the greatest relative value in SBAC within the towers.
Site rental revenues grew $66 million, from first quarter 2018 to first quarter 2019, inclusive of approximately $65 million in Organic Contribution to Site Rental Revenues and a $1 million increase in straight-lined revenues. The $65 million in Organic Contribution to Site Rental Revenues represents approximately 5.7 percent growth, comprised of approximately 9.5 percent growth from new leasing activity and contracted tenant escalations, net of approximately 3.8 percent from tenant non-renewals.