How to Play CCI Stock After Q4 Earnings & Fiber Segment Sale News?

Crown Castle Inc. CCI shares have rallied 13.8% after the tower REIT announced on March 13 that it had reached an agreement to sell its small cells and fiber solutions business for $8.5 billion, following a strategic review of its Fiber segment. The Fiber segment transaction, which is expected to be closed in the first half of 2026, subject to certain closing norms and government and regulatory nods, will see EQT Active Core Infrastructure fund acquiring the small cells business and Zayo Group Holdings Inc. purchasing the fiber solutions business, each for $4.25 billion. The move will result in Crown Castle emerging as a pure-play U.S. tower company. Apart from the Fiber segment sell announcement, CCI also reported fourth-quarter 2024 adjusted funds from operations (AFFO) per share of $1.80, which missed the Zacks Consensus Estimate of $1.82. The figure was down 1.1% year over year. Net revenues of $1.65 billion outpaced the Zacks Consensus Estimate of $1.63 billion but fell 1.5% year over year. For full-year 2024, AFFO per share was $6.98, representing an 8% year-over-year decrease. Year to date, CCI shares have rallied 17.2%, outperforming the Zacks REIT and Equity Trust - Other industry and the S&P 500 composite. While CCI stock has outperformed its peer, SBA Communications Corporation SBAC, it has narrowly underperformed American Tower Corporation AMT over the same time frame.However, before hastily deciding to buy this stock or remove it from your portfolio, it’s important to evaluate whether CCI has strong growth potential. While the strategic shifts could free up capital for tower expansion, they would impact its performance in the near term and affect its dividend. Let’s delve deeper.Year-to-Date CCI Stock Price PerformanceImage Source: Zacks Investment ResearchCCI's Fiber Segment Sale & Earnings: Key TakeawaysCrown Castle has been exploring strategic options for its fiber business since last year to refine its asset portfolio and enhance shareholder value. This move followed internal reviews and external pressures that cast doubt on the performance and long-term fit of these assets within the company’s core operations.CCI now plans to use the funds from the Fiber segment sale for debt repayment and funding share buybacks. The REIT expects to implement a $3 billion share repurchase program following the closing of the transaction and anticipates a reduction in its annualized dividend to approximately $4.25 per share in the second quarter of 2025. Management also recorded a goodwill impairment charge of around $5.0 billion for the year ended Dec. 31, 2024, leading to no goodwill remaining with respect to the Fiber reporting unit. Additionally, CCI’s total site-rental revenues fell 0.4% year over year to $1.597 billion in Q4 2024. For the full year, site-rental revenues declined 2.7% to $6.36 billion, as the organic contribution to site rental billings was outweighed by reductions in non-cash amortization of prepaid rent, straight-lined revenues and other revenue decreases. Services and other revenues totaled $52 million, marking a 26.8% decline from the same quarter last year. For full-year 2024, these revenues dropped 53.2% to $210 million, down from $449 million in the previous year.Adjusted EBITDA fell 3% year over year to $1.04 billion in the fourth quarter. For the full year, it declined 5.8% to $4.2 billion, driven by lower site rental revenue contributions, a reduction in services contribution and advisory fees, mainly related to its proxy contest and the strategic review of the Fiber business.Crown Castle expects 2025 AFFO per share in the range of $4.06-$4.17. For 2025, CCI expects site rental billings to be between $3.885 billion and $3.915 billion, while adjusted EBITDA is estimated in the band of $2.755-$2.805 billion. CCI also noted that beginning in the first quarter of 2025, the Fiber segment will be presented as a discontinued operation, and its net assets will be classified as held for sale. As a result, CCI expects to recognize a loss of around $800 million in the first quarter of 2025 and a total loss between $700 million and $900 million in full-year 2025.What to Expect for Crown Castle Now?While the move can be a strategic fit for the long term, this sale will lead to a reduction in the company's dividend amid an anticipated decrease in adjusted funds from operations (AFFO) per share.Also, Crown Castle has a substantially leveraged balance sheet. The company’s debt and other long-term obligations aggregated $23.47 billion as of Dec. 31, 2024, increasing 6.3% year over year. In a still-high-interest-rate environment, this would lead to elevated interest expenses.CCI’s Estimate Revisions and Stock ValuationEven the estimate revision trends echo similar sentiments. The Zacks Consensus Estimate for both 2025 and 2026 AFFO per share has been revised significantly southward over the past month.CCI Estimate Revision TrendImage Source: Zacks Investment ResearchFind the latest EPS estimates and surprises on Zacks Earnings Calendar.Following the recent rally, Crown Castle stock is trading at a forward 12-month price-to-FFO of 22.38X, well ahead of the REIT industry average of 15.33X and higher than its one-year median of 15.50X. Crown Castle stock is also trading at a higher valuation than its industry peers, such as American Tower and SBA Communications. This implies that the stock is overvalued compared to industry peers, making it less attractive than other investment opportunities.CCI Forward 12 Month Price-to-FFO (P/FFO) RatioImage Source: Zacks Investment ResearchEnding Note on Crown CastleCrown Castle boasts a portfolio of approximately 40,000 towers across key locations in the U.S. and is poised to benefit from the favorable fundamentals of the wireless market. While the Fiber segment’s sale would free up capital for tower expansion, the strategic shifts are likely to impact the company’s performance significantly in the near term.Also, considering the premium valuation, decline in dividend and downward AFFO per share revisions for the current year, selling this stock would be a prudent move at present. At present, Crown Castle carries a Zacks Rank #5 (Strong Sell). 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.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>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 American Tower Corporation (AMT): Free Stock Analysis Report SBA Communications Corporation (SBAC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks