Crown Castle 2017 guidance to reflect 5.5% organic growth, analyst says

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Crown Castle is due to report its third-quarter earnings Thursday and thereby provide guidance for 2017. According to New Street Research, the tower company will project 5.5 percent organic growth for next year, driven largely by forecasts of around $170 million for new leasing activity.

“We are primarily focused on guidance for ‘new leasing activity’ – anything at or above $170MM would be positive, as it would indicate steady-to-accelerating leasing revenue for the industry,” wrote New Street analyst Spencer Kurn in a research note.

New Street said that guidance would be in line with the around $170 million ($55 million of which was for small cells) Crown Castle provided for 2016. But if the 2017 guidance falls short of that mark, it could imply drawbacks for tower companies as a whole.

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“If it remains at $170MM or better, we think that is positive for the others. If it comes in below $170MM, tower investors will likely be concerned about the group in general, as it could signal a slowdown in activity,” wrote Kurn.

In all, New Street is slightly lowering its 2017 expectations for Crown Castle’s revenue growth because it was anticipating site rental escalators growth of 3.5 percent when Crown Castle’s escalators have stayed around 3 percent for the last several years. But the firm doesn’t sound overly concerned if Crown Castle’s 2017 guidance comes in below Wall Street estimates.

“Even if CCI guidance slightly below the Street on revenue, we think the stock would fare OK given that CCI tends to guide conservatively and raise guidance throughout the year,” wrote Kurn.

Plans from large carriers like Sprint to cut back on network capex by finding cheaper leaser agreements than those offered by companies like Crown Castle caused some alarm as to whether the macro network business would continue to yield dividends. But SBA and Crown Castle earlier this year both affirmed that macrocells are still a major part of the wireless infrastructure business.

"First of all, without addressing Sprint specifically, what I'd like to talk about is the fact that three of the four carriers have reported thus far and I think all of them in various ways have confirmed the need for macro sites being an integral part of their network now and in the future, and that shouldn't be surprising any of us that are close to the business," Moreland said during Crown Castle's fourth-quarter earnings call, according to Seeking Alpha transcript.