We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. By pressing "Accept All" or closing out of this banner, you accept our Privacy Policy and Terms of Service, revised from time to time, and you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties. You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
How to Play Crown Castle Stock Following 15.8% Decline in 3 Months?
Read MoreHide Full Article
Crown Castle Inc. (CCI - Free Report) has grabbed headlines in recent months. According to market sources, the buyout firm TPG is said to be in advanced talks about buying the fiber unit of the tower operator for about $8 billion. While this was revealed in December, any further development on this front is yet to come up. Also, CCI has not yet released its full-quarter and full-year 2024 earnings.
This REIT, which specializes in owning and leasing communication infrastructure across the United States, has been luring its investors with a solid dividend yield, which currently stands at 6.97%. However, this sale of fiber business, if materialized, could lead to a significant reduction in the company's dividend.
This has made investors skeptical, and CCI shares have declined 15.8% in the past three months, underperforming the Zacks REIT and Equity Trust - Other industry and the S&P 500 composite.
Nevertheless, before hastily deciding to remove this stock from your portfolio or rushing to buy after the dip, it’s important to assess whether the current concerns could significantly impact the company’s performance and evaluate whether this REIT has strong growth potential for the long term.
Three-Month Price Performance
Image Source: Zacks Investment Research
What Is Brewing at Crown Castle?
Crown Castle has been actively exploring strategic options for its fiber business in 2024 as part of its efforts to optimize its asset portfolio and enhance shareholder value. In April 2024, Crown Castle disclosed that it was in discussions with multiple parties regarding the potential sale of its fiber and small cell businesses. This announcement followed internal deliberations and external pressures concerning the performance and strategic fit of these assets within the company's overall operations.
By October 2024, a Reuters report indicated that Zayo Group, backed by EQT, and the private equity firm TPG were leading contenders in the bid to acquire Crown Castle's fiber and wireless assets in a deal valued at close to $10 billion. Finally, in December 2024, news from Bloomberg revealed that TPG had entered advanced negotiations to purchase Crown Castle's fiber unit for approximately $8 billion.
What to Expect for Crown Castle Now?
Crown Castle boasts a vast portfolio, including more than 40,000 cell towers and approximately 90,000 route miles of fiber supporting small cells and fiber solutions across major U.S. markets. This extensive infrastructure positions the company to capitalize on the growing demand for wireless connectivity. The potential divestiture reflects Crown Castle's intent to streamline its focus on its core tower operations.
While the move can be a strategic fit for the long term, this sale could lead to a significant reduction in the company's dividend amid an anticipated decrease in adjusted funds from operations (AFFO) per share.
Crown Castle also has a substantially leveraged balance sheet. The company’s debt and other long-term obligations aggregated $23.45 billion as of Sept. 30, 2024. In a still high-interest-rate environment, this would lead to elevated interest expenses.
Nevertheless, Crown Castle's focus on essential communication infrastructure aligns with the increasing demand for wireless connectivity and data transmission, positioning it well for future growth.
CCI’s Estimate Revisions and Valuation
Even the estimate revision trends echo similar sentiments. While the Zacks Consensus Estimate for 2024 AFFO per share has remained unrevised over the past two months, the same for 2025 has been revised southward over the same time frame.
Image Source: Zacks Investment Research
See the Zacks Earnings Calendar to stay ahead of market-making news.
Crown Castle stock is trading at a forward 12-month price-to-FFO of 12.96X, below the REIT industry average of 15.15X and lower than its one-year median of 15.90X. Although Crown Castle stock is currently trading at a discount compared to its industry peers, including American Tower Corporation (AMT - Free Report) and SBA Communications Corporation (SBAC - Free Report) , this valuation disparity might not be as favorable as it seems.
Forward 12 Month Price-to-FFO (P/FFO) Ratio
Image Source: Zacks Investment Research
Final Take on Crown Castle
Crown Castle stock is currently priced lower than its industry peers, but it may be prudent to wait for further clarity on the fiber business sale before making any buy or sell decisions. As the situation continues to evolve, the coming days could shed light on the full scope of challenges facing the REIT. For current investors, holding on to shares may be a sensible approach, given the company's strong dividend yield and presence in a desirable real estate sector.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Zacks' 7 Best Strong Buy Stocks (New Research Report)
Valued at $99, click below to receive our just-released report predicting the 7 stocks that will soar highest in the coming month.
Image: Shutterstock
How to Play Crown Castle Stock Following 15.8% Decline in 3 Months?
Crown Castle Inc. (CCI - Free Report) has grabbed headlines in recent months. According to market sources, the buyout firm TPG is said to be in advanced talks about buying the fiber unit of the tower operator for about $8 billion. While this was revealed in December, any further development on this front is yet to come up. Also, CCI has not yet released its full-quarter and full-year 2024 earnings.
This REIT, which specializes in owning and leasing communication infrastructure across the United States, has been luring its investors with a solid dividend yield, which currently stands at 6.97%. However, this sale of fiber business, if materialized, could lead to a significant reduction in the company's dividend.
This has made investors skeptical, and CCI shares have declined 15.8% in the past three months, underperforming the Zacks REIT and Equity Trust - Other industry and the S&P 500 composite.
Nevertheless, before hastily deciding to remove this stock from your portfolio or rushing to buy after the dip, it’s important to assess whether the current concerns could significantly impact the company’s performance and evaluate whether this REIT has strong growth potential for the long term.
Three-Month Price Performance
Image Source: Zacks Investment Research
What Is Brewing at Crown Castle?
Crown Castle has been actively exploring strategic options for its fiber business in 2024 as part of its efforts to optimize its asset portfolio and enhance shareholder value. In April 2024, Crown Castle disclosed that it was in discussions with multiple parties regarding the potential sale of its fiber and small cell businesses. This announcement followed internal deliberations and external pressures concerning the performance and strategic fit of these assets within the company's overall operations.
By October 2024, a Reuters report indicated that Zayo Group, backed by EQT, and the private equity firm TPG were leading contenders in the bid to acquire Crown Castle's fiber and wireless assets in a deal valued at close to $10 billion. Finally, in December 2024, news from Bloomberg revealed that TPG had entered advanced negotiations to purchase Crown Castle's fiber unit for approximately $8 billion.
What to Expect for Crown Castle Now?
Crown Castle boasts a vast portfolio, including more than 40,000 cell towers and approximately 90,000 route miles of fiber supporting small cells and fiber solutions across major U.S. markets. This extensive infrastructure positions the company to capitalize on the growing demand for wireless connectivity. The potential divestiture reflects Crown Castle's intent to streamline its focus on its core tower operations.
While the move can be a strategic fit for the long term, this sale could lead to a significant reduction in the company's dividend amid an anticipated decrease in adjusted funds from operations (AFFO) per share.
Crown Castle also has a substantially leveraged balance sheet. The company’s debt and other long-term obligations aggregated $23.45 billion as of Sept. 30, 2024. In a still high-interest-rate environment, this would lead to elevated interest expenses.
Nevertheless, Crown Castle's focus on essential communication infrastructure aligns with the increasing demand for wireless connectivity and data transmission, positioning it well for future growth.
CCI’s Estimate Revisions and Valuation
Even the estimate revision trends echo similar sentiments. While the Zacks Consensus Estimate for 2024 AFFO per share has remained unrevised over the past two months, the same for 2025 has been revised southward over the same time frame.
Image Source: Zacks Investment Research
See the Zacks Earnings Calendar to stay ahead of market-making news.
Crown Castle stock is trading at a forward 12-month price-to-FFO of 12.96X, below the REIT industry average of 15.15X and lower than its one-year median of 15.90X. Although Crown Castle stock is currently trading at a discount compared to its industry peers, including American Tower Corporation (AMT - Free Report) and SBA Communications Corporation (SBAC - Free Report) , this valuation disparity might not be as favorable as it seems.
Forward 12 Month Price-to-FFO (P/FFO) Ratio
Image Source: Zacks Investment Research
Final Take on Crown Castle
Crown Castle stock is currently priced lower than its industry peers, but it may be prudent to wait for further clarity on the fiber business sale before making any buy or sell decisions. As the situation continues to evolve, the coming days could shed light on the full scope of challenges facing the REIT. For current investors, holding on to shares may be a sensible approach, given the company's strong dividend yield and presence in a desirable real estate sector.
At present, Crown Castle carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.