Crown Castle Stock Dips Despite Great Financial Results
Crown Castle International Corp (NYSE:CCI) is an excellent stock that has been quietly climbing over the last number of months. Since the start of March, CCI stock has rallied by 27%.
A real estate investment trust (REIT) that provides shared communications infrastructure, Crown Castle has been benefiting from the growing demand for small cells and the infrastructure necessary for 5G networks, the Internet of things (IoT), and smart city technologies.
Mobile carriers will need to continue to invest heavily in their networks as mobile data usage climbs by 30% to 40% annually in the U.S.
That helps explain why Crown Castle International Corp reported great second-quarter results that topped Wall Street expectations. The company also raised its full-year outlook.
Despite the outsized gains and robust outlook, Crown Castle stock dropped by six percent on July 22, the day after the company released its second-quarter report.
That dip could provide investors with a great entry point.
Of the Wall Street analysts providing a 12-month forecast for CCI stock, their median price target is $207.56, with a high estimate of $229.00. That points to upside of eight percent and 18%, respectively.
Chart courtesy of StockCharts.com
CCI Stock Overview
Crown Castle is the U.S.’s largest provider of shared communications infrastructure. It has a presence in every major market in the country.
The company has more than 40,000 cell towers in the U.S., approximately 80,000 on-air or under-contract small cell nodes, and more than 80,000 route miles of fiber. (Source: “Investors,” Crown Castle International Corp, last accessed July 28, 2021.)
Crown Castle owns the real estate that mobile communications providers need to get their wireless technology out to the masses. Crown Castle leases out space on its towers to wireless service providers, who install equipment on those towers to support their wireless networks.
Like all good landlords, Crown Castle International Corp enters long-term leases with its customers. Those agreements include annual rent increase of about three percent, giving the company a high, reliable revenue stream.
As a REIT, Crown Castle is legally obligated to distribute at least 90% of its income to shareholders on an annual basis. As a result, the company provides Crown Castle stock investors with a reliable dividend that it raises on a consistent basis.
In May, Crown Castle International Corp declared a quarterly dividend for CCI stock of $1.33 per share, or $5.32 on an annual basis. That represents an annual dividend yield of 2.6%.
In 2017, the company established a long-term dividend growth target of seven to eight percent. Since then, Crown Castle stock’s dividends have increased at a compound annual growth rate of nine percent.
Going forward, Crown Castle believes it will continue to deliver on its long-term dividend-growth target.
Strong Q2 Results & Full-Year Guidance
For the second quarter ended June 30, Crown Castle announced that its site rental revenue increased by eight percent year-over-year to $1.4 billion. Its income from continuing operations was $333.0 million, versus $200.0 million in the same prior-year period. (Source: “Crown Castle Reports Second Quarter 2021 Results and Raises Outlook for Full Year 2021,” Crown Castle International Corp., July 21, 2021.)
The company’s adjusted funds from operations (AFFO) were $1.71 per share, an 18% increase from the second-quarter-2020 AFFO of $1.45 per share. Wall Street was looking for AFFO of $1.63 per share.
During the quarter, Crown Castle International Corp paid common stock dividends of approximately $575.0 million, or $1.33 per common share, an increase of approximately 11%.
Dan Schlanger, the company’s CFO, noted,
The elevated level of Towers activity this year is contributing to an expected 12% growth in AFFO per share, meaningfully exceeding our long-term target of 7% to 8% per year. Looking forward, we believe we are in a great position to deliver on our growth target while at the same time making investments in our business that we believe will generate attractive long-term returns and support future growth.
For 2021, Crown Castle International Corp expects to report:
- Midpoint Site rental revenue of $5.7 billion, up from previous midpoint guidance of $5.6 billion
- Midpoint income from continuing operations of $1.1 billion, or $2.57 per share, up from previous midpoint guidance of $1.0 billion, or $2.50 per share
- Midpoint adjusted earnings of $3.78 billion, up from previous midpoint guidance of $3.75 billion
- Midpoint AFFO of $2.96 billion, or $6.83 per share, up from previous midpoint guidance of $2.94 billion, or $6.79 per share
As mentioned earlier, Crown Castle International Corp is the U.S.’s largest provider of horizontal and vertical real estate for wireless providers.
There are a number of significant growth drivers that should help the company maintain its leading position in the U.S. They include strong U.S. wireless capital investment, increasing data consumption, cell site growth, and available spectrum.
As a result, cell towers will continue to play an integral part in the long-term roll-out of 5G and beyond. That should help Crown Castle stock provide significant long-term value to shareholders.