Analyst Note| Matthew Dolgin, CFA |
Crown Castle’s first-quarter revenue, operating profit, and adjusted funds from operations were all slightly better than our forecasts, and management said levels of new leasing activity on its towers are high, as carriers’ spectrum deployments for 5G are in full swing. Nonetheless, the firm’s full-year organic growth outlook for each of its businesses is unchanged. While Crown materially raised its full-year financial guidance, the boost was almost entirely due to higher than previously forecast straight-line revenue resulting from a long-term tower lease agreement recently commenced with Verizon. The boost to the anticipated 2021 top and bottom lines therefore won’t result in much higher cash inflows and isn’t a result of greater 2021 demand but rather a contract that extends for 10 years. We are maintaining our $110 fair value estimate. Strengthening small-cell performance would be the key to making us more optimistic, and we still haven’t seen that.