Crown Castle International Corp. (CCI) owns, operates, and leases over 40,000 cell towers and approximately 80,000 route miles of fiber supporting small cells and fiber solutions across every primary U.S. market. On the other hand, American Tower Corporation (AMT) is one of the largest global REITs, which is a leading independent owner, operator, and developer of multitenant communications real estate with a portfolio of approximately 219,000 communications sites.
The economy has been under severe inflationary stress, with the Consumer Price Index rising to 8.6% in May, the fastest advance in more than 40 years. The Federal Reserve recently raised interest rates by 0.75%, the most significant move in a single meeting since 1994. Moreover, the stock market is expected to remain under pressure as the Fed leans on higher borrowing costs to dampen demand and slow faster-than-expected inflation through further interest rate hikes this year. Amid this environment, investors could turn toward REIT stocks to hedge their portfolios against short-term market volatility by ensuring a steady income stream. Consequently, we think both CCI and AMT might rally.
AMT has gained 2.2% over the past three months, while CCI has negative returns. Also, AMT’s 3.8% gains over the past month compared to CCI’s negative returns.
But which of these two stocks is a better buy now? Let’s find out.
Latest Developments
On May 10, 2022, CCI announced that its Board of Directors had declared a quarterly cash dividend of $1.47 per common share. The quarterly dividend will be payable on June 30, 2022, to common stockholders of record at the close of business on June 15, 2022.
On May 19, 2022, AMT announced that its board of directors had declared its quarterly cash distribution of $1.43 per share on shares of its common stock. The distribution is payable on July 8, 2022, to the stockholders of record at the close of business on June 17, 2022.
Recent Financial Results
CCI’s site rental revenues increased 15% year-over-year to $1.58 billion for the fiscal first quarter ended March 31, 2022. The company’s adjusted EBITDA grew 22% year-over-year to $1.10 billion, while its income from continuing operations came in at $421 million, representing a 248% year-over-year increase. Also, its income from continuing operations per share came in at $0.97, up 246% year-over-year.
AMT’s revenue increased 23.2% year-over-year to $2.66 billion for the fiscal first quarter ended March 31, 2022. The company’s adjusted EBITDA grew 12.8% year-over-year to $1.62 billion, while its net income came in at $703 million representing a 7.7% year-over-year increase. Also, its EPS came in at $1.56, up 7.6% year-over-year.
Past and Expected Financial Performance
CCI’s EBIT and EPS grew at CAGRs of 14.9% and 33.3%, respectively, over the past three years. Analysts expect CCI’s revenue to increase 9.5% for the quarter ending June 30, 2022, and 9.4% in fiscal 2022. The company’s EPS is expected to grow 24.7% for the quarter ending June 30, 2022, and 56.1% in fiscal 2022. Moreover, its EPS is expected to grow at a rate of 13% per annum over the next five years.
On the other hand, AMT’s EBIT and EPS grew at CAGRs of 6.7% and 24%, respectively, over the past three years. The company’s revenue is expected to increase 20.1% for the quarter ending June 30, 2022, and 14.1% in fiscal 2022. However, its EPS is expected to decline 41.8% for the quarter ending June 30, 2022, and 20.1% in fiscal 2022. Also, AMT’s EPS is expected to grow at a rate of 13.2% per annum over the next five years.
Profitability
AMT’s trailing-12-month revenue is 1.49 times what CCI generates. Moreover, AMT is more profitable, with a gross profit margin and net income margin of 70.51% and 26.72%, compared to CCI’s 69.08% and 22.12%, respectively.
Furthermore, AMT’s ROE, ROA, and ROTC of 37.94%, 3.67%, and 4.17% are higher than CCI’s 17.19%, 3.54%, and 3.90%, respectively.
Valuation
In terms of forward non-GAAP P/E, AMT is currently trading at 54.44x, 34.6% higher than CCI’s 40.45x. Moreover, AMT’s forward EV/EBITDA ratio of 24.72x is 12% higher than CCI’s 22.07x.
So, CCI is relatively affordable here.
POWR Ratings
CCI has a B overall rating, equating to a Buy in our proprietary POWR Ratings system. On the other hand, AMT has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
CCI has a B grade for Growth, consistent with analysts’ expectations that its EPS will increase in the upcoming months. On the other hand, AMT has a D grade for Growth, in sync with analysts’ expectations that its EPS will decline in the near term.
Of the 50 stocks in the REITs - Diversified industry, CCI is ranked #12, while AMT is ranked #32.
Beyond what I’ve stated above, we have also rated the stocks for Quality, Momentum, Value, Stability, and Sentiment. Click here to view all the CCI ratings. Also, get all the AMT ratings here.
The Winner
As the stock market is expected to remain under pressure on concerns over the aggressive Fed rate increases and high inflation, REITs should witness increasing investor attention because of their high dividend yield. While both CCI and AMT are expected to gain, it is better to bet on CCI now because of its lower valuation and better growth prospects.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the REITs - Diversified industry here.
CCI shares were trading at $154.52 per share on Thursday afternoon, down $5.73 (-3.58%). Year-to-date, CCI has declined -24.68%, versus a -22.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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