Crown Castle's first-quarter earnings drew relatively positive responses from analysts as the company reported mixed financial results but increased its guidance for the year.
The Houston-based tower company posted revenue of $934.4 million during the quarter, falling slightly short of Wall Street expectations. But funds from operations – which, as AP noted, is a key measure of profitability – was $395 million, or $1.18 per share.
A Zacks Investment Research survey of eight analysts produced an average estimate of $1.14 per share for funds from operations, AP reported.
And Crown Castle was quick to point out that site rental revenues and site rental gross margin all exceeded the midpoint of its previous guidance. The company raised its 2016 guidance for site rental revenue to $3.22 billion from $3.18 billion, and increased its forecast for adjusted EBITDA to a range of $2.19 billion to $2.22 billion, up from $2.18 billion.
Crown Castle's increased guidance may calm the nerves of investors who fear that carrier strategies focusing on small cells and other non-traditional transmission equipment threatens the tower industry. Shares of both Crown Castle and American Tower slid earlier this year following a Re/code report that Sprint had finalized plans to dramatically overhaul its network, moving its equipment to land it would lease from the government.
Sprint has since said the information in that report "wasn't correct." Crown Castle CEO Ben Moreland predicted that the rise of the IoT will only increase demand for towers.
"Our track record of consistently delivering results that meet or exceed our guidance, including the strong results we generated in the first quarter, further demonstrates the long-term demand for our wireless infrastructure," Moreland said in a prepared statement. "The innovation and adoption of wireless connectivity is expected to drive new applications, such as machine-to-machine connections, mobile video and fixed wireless broadband, all of which gives us confidence in our ability to deliver on our stated goal of generating compound annual growth in AFFO and dividends per share of 6 percent to 7 percent organically over the next several years."
Interestingly, Crown Castle changed its reporting operating segments in its first quarter earnings, as analysts at Evercore ISI noted, breaking out towers and small cells separately. Evercore reported that Crown Castle's year-over-year growth in site leasing for towers was 4.1 percent while small cells saw 70.8 percent growth year over year. That result was skewed by the $1 billion acquisition in April 2015 of Sunesys, however, which provides dark fiber capabilities for small cell backhaul services.
"The increase in the fiscal year 2016 outlook reflects the contribution from the Tower Development Corporation acquisition, 1Q performance, and the push-out of churn," Evercore analysts wrote. "Overall, CCI results and the updated fiscal year 2016 outlook present a picture of steady execution."
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