Is Crown Castle International’s Stock a Buy Now?

With shares of Crown Castle International (NYSE:CCI) trading at around $75.13, is CCI an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

celltowerC = Catalyst for the Stock’s Movement

Site rental revenues are up 12% to $570 million, Q4 revenue increased 30 percent to $674 million from $519 million from the same period a year ago, FY2012 EPS came in at $0.64 versus $0.52 in 2011, FY2012 revenue came in at $2.12 billion versus $2.03 billion in 2011, and the 2013 outlook was raised to EPS between $0.20 and $0.53. This is all good news, but it’s not the only news.

Q4 EPS came in at -$0.07, which is a big drop from $0.16 in the same quarter last year. Q1 EPS is expected to come in between -$0.06 and $0.08. No matter how you spin it, that’s a drop compared to last year’s Q1 EPS of $0.17. However, Q1 revenue is expected to come in at $605 million to $610 million, which would be a significant improvement over last year’s Q1 revenue of $551.74 million.

Crown Castle International has solid margins, good cash flow, and the company has decreased the average cost of debt. Crown Castle International has also recently closed on approximately $4 billion in acquisitions, which will help increase market share in the future. Crown Castle International will now have exclusive rights to 7,100 T-Mobile U.S. towers. Other acquisitions include NextG Networks and 2,300 ground lease related assets from Capital Partners.

Everything looks good so far. Now let’s take a look at some important numbers.

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E = Equity to Debt Ratio Is Weak

The debt-to-equity ratio for Crown Castle International proves that the company has poor debt management. The balance sheet also needs a lot of help. On the bright side, there is over $700 million in operating cash flow.

Debt-To-Equity

Cash

Long-Term Debt

CCI

2.85

$392.21 Million

$8.38 Billion

AMT

2.03

$425.79 Million

$7.49 Billion

SBAC

12.04

$1.47 Billion

$5.31 Billion

 

T = Technicals on the Stock Chart Are Strong

Crown Castle International has outperformed American Tower Corporation (NYSE:AMT) and SBA Communications Corp (NASDAQ:SBAC) over the past year.

1 Month

Year-To-Date

1 Year

3 Year

CCI

5.43%

4.12%

63.15%

101.20%

AMT

2.87%

2.20%

29.42%

90.78%

SBAC

0.63%

0.52%

58.52%

106.80%

 

At $75.13, Crown Castle International is currently trading above all its averages.

50-Day SMA

69.20

100-Day SMA

66.22

200-Day SMA

60.70

 

E = Earnings Have Been Inconsistent

Earnings have improved the past two years, but there is no consistent pattern. On the other hand, revenue has shown steady improvement since 2007, which is rare.

2007

2008

2009

2010

2011

Revenue ($)in billions

1.39

1.53

1.69

1.88

2.03

Diluted EPS ($)

-0.87

-0.25

-0.47

-1.16

0.52

 

We already know what happened this quarter. Now let’s take a look at previous quarters.

9/2011

12/2011

3/2012

6/2012

9/2012

Revenue ($)in millions

513.88

519.47

551.74

585.51

621.34

Diluted EPS ($)

0.15

0.16

0.17

0.40

0.14

T = Trends Support the Industry

Wireless Infrastructure has been a hot industry for over a decade. The past few years have been especially rewarding for most companies and investors. At the same time, these companies/stocks are not recession-proof. All the stocks in this industry were absolutely clobbered during the financial crisis. Therefore, if you’re skeptical about the current bull run in the broader market, then you might want to steer clear.

Conclusion

Crown Castle International is steadily growing and improving its debt situation, but debt management is still poor, the stock is highly susceptible to market downturns, and the valuation is poor with a Trailing P/E of 86.46.

Despite the recent run in the stock price, Crown Castle International is currently a STAY AWAY. It’s worth another look in a few months.

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