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Crown Castle International's Earnings: Plenty of Untapped Growth Ahead

By Anders Bylund - Updated Apr 22, 2019 at 9:56PM

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The cell tower operator delivered double-digit revenue growth in the fourth quarter, more than doubling its earnings.

Cell tower and long-range fiber network manager Crown Castle International (CCI -2.81%) posted fourth-quarter and full-year results on Wednesday. Here's a closer look at Crown Castle's results for the final quarter of 2018.

Crown Castle's fourth-quarter results: The raw numbers

Metric

Q4 2018

Q4 2017

Year-Over-Year Change

Net revenue

$1.42 billion

$1.24 billion

15%

Net income attributable to common shareholders

$185 million

$70 million

164%

GAAP earnings per share (diluted)

$0.44

$0.17

159%

Data source: Crown Castle.

What happened with Crown Castle this quarter?

  • Adjusted funds from operations (AFFO) rose 15% to $591 million.
  • Site rental revenue came in $15 million above management's guidance of $1.19 billion for the fourth quarter. Meanwhile, net income stopped $1 million below the guided target, and AFFO fell $8 million short. So it's a mixed bag, but hardly a wild one -- none of these results landed further than 1.5% away from management's stated goals.
  • Tower-based sites produced 7% rental revenue growth compared to the year-ago period, stopping at $798 million. Fiber sites delivered 33% higher sales of $411 million.
  • Free cash flow for the full year came in at $761 million, 7% below the cash-profit metric's reading in 2017.
A densely populated cell tower set against blue skies and scattered clouds.

Image source: Getty Images.

What management had to say

In a conference call with financial analysts, Crown Castle CEO Jay Brown looked ahead to strong growth opportunities over the next couple of years.

I see a long runway of growth in front of Crown Castle as our customers continue to invest heavily in their 4G networks to keep pace with data demand growth from existing technologies while the deployment of 5G is just getting started. According to the latest estimates from Cisco, mobile data traffic in the U.S. is expected to grow fivefold from 2017 through 2022. To put that growth into perspective, that means mobile data traffic in 2022 is expected to be equal to 12 times the volume of all internet traffic in the U.S. in 2005.

Brown also pointed out that mobile data has a lot of growing up left to do. That's good news for mobile infrastructure specialists such as Crown Castle.

"I think we're just scratching the surface when you consider mobile traffic is expected to account for just 6% of total [Internet Protocol] traffic in the U.S. in 2022 -- up from 3% a couple of years ago," he said.

Looking ahead

In the next fiscal year, Crown Castle expects site rental revenue to rise roughly 5% to $4.96 billion. Earnings should stop near $1.97 per share, 22% above the 2018 result. Management projected AFFO profits of approximately $2.44 billion, 7% higher than this year's reading.

Check out the latest Crown Castle International earnings call transcript.

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