Cell phone usage continues to mushroom. That means good times for Crown Castle International (CCI), the second-biggest U.S. operator of cell phone towers after American Tower (AMT).
Crown Castle has more than 22,000 sites in the United States, covering 92 of the biggest 100 markets, and 1,600 sites in Australia, covering most of the country’s population. The smartphone craze is pushing cell phone carriers to rent more space on towers to accommodate the exploding amount of data being sent to and from these phones. That translates into profit for Crown Castle.
Nielsen’s May survey of U.S. cell phone users showed that 38 percent of them now own smartphones. Fifty-five percent of those who bought a new handset in the prior three months opted for a smartphone, up from 34 percent a year ago.
Crown Castle has a nearly guaranteed cash flow. Almost all its revenue comes from contracts that range from five to 25 years and generally include automatic price increases of 3 percent to 4 percent, according to Morningstar research.
The company’s revenue climbed 10 percent in the second quarter, to $500 million from $456 million a year earlier. Recurring cash flow jumped 22 percent to $189 million. Crown Castle registered profit of $31 million, reversing a year-earlier loss of $98 million.
Deals with leading carriers AT&T (T), Verizon (VZ) and Sprint (S) provide a rosy outlook for Crown Castle, which raised its earnings forecast for all of 2011 in the second-quarter earnings report. The company predicted that its leasing activity would rise 15 to 20 percent for the rest of the year.
Analysts are bullish too, with 16 of 22 surveyed by Thomson/First Call rating Crown Castle shares a buy or strong buy.
Collins Stewart analysts recently boosted their stock price target to $58 from $56. Crown Castle recently traded at $40. Crown Castle next reports around Oct. 27.
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