Is Crown Castle (CCI) Likely to Top Earnings? - Analyst Blog

Crown Castle International Corp. CCI is slated to report its first-quarter 2014 financial numbers after the closing bell on April 23, 2014.

Why a Likely Positive Surprise?

Our proven model shows that Crown Castle International is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +3.57%. The Zacks Consensus Estimate is poised at 28 cents, whereas the Most Accurate estimate stands at 29 cents. This is a meaningful and leading indicator of a likely positive earnings surprise.  

Zacks Rank: Crown Castle International currently has a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks of #1 (Strong Buy), 2 (Buy) or 3 (Hold) have significantly higher chances of beating earnings. The Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.

The combination of Crown Castle International's Zacks Rank #3 and +3.57% ESP makes us confident of positive earnings beat this release.

What Will Drive the Better-Than-Expected Earnings?

We expect an impressive performance from Crown Castle International as an extensive tower portfolio, successful integration of the T-Mobile TMUS business, expansion of the small cell business, increased smartphone usage and aggressive deployment of 4GLTE network are likely to boost the company's results in the coming quarter.

Wireless services are advancing rapidly in terms of additional features and capabilities.  Much of the infrastructure and upgrades require effective site management of cell towers and equipment. Crown Castle effectively addresses this opportunity as 95% of its quarterly revenues come from wireless service providers.

The company has long-term (typically 5-10 years) tower lease agreements with the top four U.S. carriers, which contribute nearly 84% of its revenues. Thus, these agreements make management confident of generating nearly $21 billion of revenues in the next 8 years.

On the downside, evolution of new technologies may reduce the demand for site leases. The recent developments of satellite-delivered radio and video services will lower the need for tower-based broadcast transmission. In addition, frequent changes in demand for network services and infrastructure support will increase the volatility of the company's revenues.

Other Stocks to Consider

Other companies you may want to consider on the basis of our model which shows that these have the right combination of elements to post an earnings beat this quarter include:

America Movil S.A.B. de C.V. AMX with Earnings ESP of +9.76% and Zacks Rank #3.

RigNet, Inc. RNET with Earnings ESP of +11.11% and Zacks Rank #3.

The GEO Group, Inc. GEO with Earnings ESP of +12.07% and Zacks Rank #1 (Strong Buy).