Crown Castle International Corp.: 5G Stock Rips Higher on Strong Financials & Outlook

Crown Castle stockCrown Castle Stock Bullish on Strong Outlook

Crown Castle International Corp (NYSE:CCI) has been one of the better-performing 5G stocks thus far in 2021. Since the start of the year, CCI stock has rallied by 12%. Crown Castle stock has also rallied by 30% since the start of 2020 and 60% since bottoming in March 2020 from the coronavirus-fueled sell-off.

Despite the strong gains, CCI stock continues to have excellent long-term growth potential.

During a year rocked by the coronavirus pandemic, Crown Castle International Corp reported industry-leading tower revenue growth in the U.S.

Not only has the company’s strong financials resulted in robust share-price growth, but Crown Castle’s strong cash flow also means it can continue to reward buy-and-hold investors with strong dividend growth of seven to eight percent per year.

Advertisement

Crown Castle stock currently provides an annual dividend of $5.32, for a dividend rate of 3.1%.

This might explain why CCI stock’s top holder is The Vanguard Group, Inc., which holds 54.5 million shares (12.6% of the company), valued at $8.6 billion. The second top holder, Blackrock, Inc., owns 30.0 million shares (6.9% of the company), valued at $4.8 billion. (Source: “Crown Castle International Corp. (REIT) (CCI),” Yahoo! Finance, last accessed April 8, 2021.

Crown Castle is also Bill and Melinda Gates’ favorite 5G stock. Their foundation owns 5.3 million shares, valued at $934.4 million as of this writing. (Source: “Form 13F-HR Bill & Melinda Gates Foundation Trust,” SEC Edgar Filing Tracker, February 12, 2021.)

Chart courtesy of StockCharts.com

CCI Stock Overview

Crown Castle is the country’s largest provider of shared communications infrastructure. Its 5G infrastructure consists of more than 40,000 cell towers in the U.S. (Source: “Investors,” Crown Castle International Corp, last accessed April 8, 2021.)

The company also owns approximately 80,000 on-air or under-contract small cell nodes and more than 80,000 route miles of fiber, giving it a presence in every major U.S. market.

Crown Castle International Corp leases space on its towers to wireless service providers, which install equipment on the towers to support their wireless networks. The company’s fiber is primarily leased by wireless service providers to set up small-cell network infrastructure and by enterprises for their internal connection needs.

Crown Castle has a very concentrated customer base, with more than 70% of its revenue coming from the big three U.S. mobile carriers. The company operates as a real estate investment trust (REIT).

Relationship With Verizon Expands

Crown Castle recently signed a long-term agreement with Verizon Communications Inc. (NYSE:VZ) to support Verizon’s “5G Ultra Wideband” and “5G Nationwide” deployment. (Source: “Crown Castle and Verizon Expand Strategic Relationship with Long-Term 5G Small Cell Commitment,” Crown Castle International Corp, January 27, 2021.)

Verizon has committed to lease 15,000 new small cells from Crown Castle over the next four years. Once installed, the small cell leases will have initial terms of 10 years.

Strong 2020 Results

For the fiscal year ended December 31, Crown Castle announced that its revenue increased 1.3% year-over-year to $5.8 billion. Its site rental revenue was up four percent, at $5.3 billion. (Source: “Crown Castle Reports Fourth Quarter and Full Year 2020 Results, Maintains Outlook for Full Year 2021,” Crown Castle International Corp, January 27, 2021.)

The REIT’s net income climbed 23% year-over-year to $1.1 billion, or $2.35 per share.

Crown Castle’s adjusted earnings before income, taxes, depreciation, and amortization (EBITDA) were $3.7 billion, versus $3.3 billion in 2019. Its adjusted funds from operations (AFFO) were $2.9 billion ($6.78 per share), compared to $2.4 billion ($5.68 per share) in 2019.

During 2020, Crown Castle paid common stock dividends of approximately $2.1 billion in the aggregate ($4.93 per common share), an increase of approximately eight percent on a per-share basis over 2019.

Business Outlook

For fiscal 2021, Crown Castle International Corp expects to report:

  • Site rental revenue between $5.53 billion and $5.57 billion.
  • Net income between $957.0 million and $1.0 billion
  • Adjusted EBITDA between $3.58 billion and $3.62 billion
  • AFFO between $2.88 billion and $2.92 billion
  • AFFO per share between $6.64 and $6.74

Analyst Take

Crown Castle International Corp is the largest provider of shared communications infrastructure.

Even though 2020 was tough economically, the company delivered another year of solid revenue growth and AFFO-per-share growth that was in line with Crown Castle’s long-term target range. The company expects that growth trend to continue in 2021, which bodes well for Crown Castle stock.