Shares of Crown Castle (CCI -0.67%), a real estate investment trust (REIT) that is one of the largest owners and operators of cellphone towers, were moving higher after the company pleased investors with its fourth-quarter earnings report, topping estimates on the top and bottom lines.
As of 12:47 p.m. ET, the stock was up 3.4%.
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Crown Castle tops a low bar
Crown Castle's business shrank in the quarter, with revenue down 5% to $1.67 billion, ahead of estimates of $1.65 billion. That decline was attributable to a slide in service revenue, though site rental revenue, its primary business, continued to grow, up 1.6% to $1.6 billion.
The company continued to expand its infrastructure, adding 8,000 new small cell nodes with another 2,000 set to come online in the first quarter.
On the bottom line, the company also beat estimates in adjusted funds from operations (AFFO), the key bottom line metric in REITs, with AFFO falling from $1.85 to $1.82, ahead of the consensus at $1.79.
Other bottom-line metrics like generally accepted accounting principles (GAAP) and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also fell. The cancellation of contracts with Sprint in April still seems to be weighing on the company's performance.
CFO Dan Schlanger said, "The growth delivered in 2023 across towers, small cells, and fiber solutions demonstrates our customers' continued demand for our assets, and we are well positioned to execute on our expectations for 2024."
What's next for Crown Castle?
Looking ahead to 2024, the company expects site rental revenues in a range with a midpoint of $6.37 billion, representing a 2% decline from 2023, and it sees AFFO falling 8% to $6.91.
While that guidance may be disappointing, Crown Castle stock fell sharply in 2023 as interest rates rose, and investors seem to be betting that falling rates will help boost the company's prospects this year. Its forecasted AFFO is enough to safely fund its 5.9%-yielding dividend.
