CCI - Crown Castle: Cash Flow Pressures And Debt Financing Limit Upside
2024-05-18 06:22:22 ET
Summary
- Crown Castle shares have underperformed, losing 8% this year due to high interest rates and Sprint-related cancellations.
- Q1 results showed a decline in revenue and FFO, with ongoing increases in interest expense reducing FFO more sharply.
- The company's cap-ex program is largely debt-funded, leading to a burdened balance sheet and limited cash flow growth, and its dividend coverage is low.
- The company is considering alternatives for its fiber unit, but the path to value creation for shareholders is unclear.
Shares of Crown Castle ( CCI ) have been a poor performer this year, losing 8%, as high interest rates and Sprint-related cancellations have weighed on investor sentiment and results. In November , I last covered Crown Castle, and I downgraded shares to a “hold.” I was disappointed by increasing cap-ex spending in the face of weak organic growth and viewed its reliance on debt financing as aggressive in this interest rate environment. Since then, shares have risen 11%, significantly lagging the S&P 500’s 22% rally. With that magnitude of relative underperformance, one could argue a “sell” rating would have been justified. With new financial data, now is an opportune time to revisit CCI, given the company is in a proxy fight, which should come to a conclusion over the next week. This may also provide clarity around strategic alternatives for a business unit. I remain cautious. While retaining a hold rating, I am modestly more negative than several months ago as challenges appear more structural....
Crown Castle: Cash Flow Pressures And Debt Financing Limit Upside