4 Reasons That Make Crown Castle Stock a Solid Pick for Your Portfolio

Crown Castle CCI owns a portfolio of wireless communication infrastructure assets in the United States. As wireless data consumption is expected to increase significantly over the next few years, service providers are likely to continue their network expansion and densification efforts to meet this incremental demand, driving demand for CCI’s properties. A healthy balance sheet position is likely to support its growth endeavors.The REIT has been in the news recently. According to people familiar with the matter, private equity firm TPG is in advanced talks to buy the Crown Castle fiber business for $8 billion. Per Bloomberg, the deal for the fiber and wireless assets is expected to be announced in the coming weeks. No final decision has been made, and there is a chance that the ongoing discussions may not succeed or a different buyer might appear. The potential sale would enable Crown Castle to focus on its core tower business.Although shares of the company have declined 14.6%, wider than the industry’s fall of 10%, analysts seem bullish on this Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for its 2024 and adjusted funds from operations (AFFO) per share has been raised a cent over the past two months to $7.00.Given the rise in wireless connectivity usage and the secular trends of the industry, there is immense scope for growth. With CCI’s strategically located assets, it is expected to perform well in the quarters ahead. Hence, there is decent room for this stock’s growth.Image Source: Zacks Investment ResearchFactors That Make Crown Castle a Solid PickHealthy Industry Fundamentals & Solid Property Base: The exponential growth in mobile data usage, higher availability of spectrum and deployment of 5G networks at scale are driving significant network investments by carriers who aim to improve and densify their cell sites. Wireless data consumption is expected to increase considerably over the next several years, driven by the advent of next-generation technologies, including edge computing functionality, autonomous vehicle networks and the Internet of Things, and the rampant usage of network-intensive applications for video conferencing and cloud services and hybrid-working scenarios. Given Crown Castle’s unmatched portfolio of more than 40,000 cell towers and around 90,000 route miles of fiber supporting small cells and fiber solutions across every major U.S. market, it remains well-positioned to capitalize on this upbeat trend.In the third quarter of 2024, excluding the impact of Sprint Cancellations, the company reported 5.2% consolidated organic growth, consisting of 4.3% from towers, 25% from small cells and 1% from fiber solutions. Management remains on track to deliver 2024 consolidated organic revenue growth of approximately 5%, including 4.5% in towers, 10% in small cells and 2% in fiber solutions, adjusted for the impact of Sprint Cancellations. The company expects 11,000 to 13,000 new revenue-generating nodes in 2024 compared to 8,000 nodes in 2023.Resilient Business Model: Crown Castle’s strong internally generated cash flow, supported by its tower and fiber segments, is impressive. The company has long-term tower lease agreements with top U.S. carriers, which contribute to recurring site rental cash flows over the long term. The wireless tenant contracts have an initial term of five to 15 years with contractual escalators and multiple renewal periods of five to 10 years each, which the tenant can exercise at their discretion. The initial term for the fiber solutions tenant contracts generally varies between one and 20 years. Such long-term leases enable the company to enjoy recurring revenues that provide top-line stability, while contracted rent escalators on the majority of its revenues offer embedded growth. Moreover, a strong and creditworthy tenant base adds resiliency to its business.Balance Sheet Strength & ROE: Crown Castle has sufficient liquidity and a decent balance sheet position. The company exited the third quarter of 2024 with cash and cash equivalents of $194 million. As of Sept. 30, 2024, the net debt to last quarter’s annualized adjusted EBITDA was 5.5X. It has limited debt maturities through 2025, with its weighted average debt maturity of seven years. Crown Castle has enjoyed historical cash flow growth of 8.30% compared with 2.30% of the industry. This REIT’s trailing 12-month return on equity (ROE) highlights its growth potential. CCI’s ROE is 20.98% compared with the industry’s average of 2.73%. This reflects that the company reinvests more efficiently compared with the industry.Dividend Payout: Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and Crown Castle is committed to that. It has increased its dividend three times in the last five years, and its five-year annualized dividend growth rate is 6.91%. Given that the company’s dividends are supported by high-quality, long-term contracted lease payments, and it benefits from being a provider of mission-critical shared communication infrastructure assets, we expect the dividend payout to be sustainable over the long run.Other Stocks to ConsiderSome other top-ranked stocks from the REIT sector are SL Green Realty SLG and OUTFRONT Media Inc. OUT, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The Zacks Consensus Estimate for SL Green’s 2024 FFO per share has been revised 2.9% north over the past month to $7.83.The Zacks Consensus Estimate for OUTFRONT Media’s 2024 FFO per share has been raised three cents over the past two months to $1.73.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 Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Crown Castle Inc. (CCI): Free Stock Analysis Report SL Green Realty Corporation (SLG): Free Stock Analysis Report OUTFRONT Media Inc. (OUT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks