Crown Castle International Corp. CCI, a leading wireless communication tower operator in the U.S., is scheduled to report second-quarter 2017 financial numbers on Jul 19, after market closes.

Last quarter, the company posted a positive earnings surprise of 6.90%. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 3.10%.

The price performance of Crown Castle was also been impressive over the last six months. The stock returned 12.8%, outshining the Zacks categorized REIT- Equity Trust Other industry’s gain of 5.15% over the same time frame.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Crown Castle’s continuous operation in a consolidated wireless industry has reduced demand for cell tower deployment. This is, therefore, expected to have an adverse effect on the company’s revenues.

The leading four Crown Castle customers – Verizon Communications Inc. VZ, AT&T Inc. T, Sprint Corporation (S) and T-Mobile – account for the majority of its total revenue. Hence, loss of any of these customers or consolidation will significantly impact the wireless tower operator’s top line.

Evolution of new technologies may reduce the demand for site leases. In addition, frequent changes in demand for network services and infrastructure support tend to increase volatility in revenues. Moreover, popularity of the Voice over WiFi network is increasing in metro cities. With both mobile handset manufacturers and wireless carriers rapidly adopting the technology, the company’s top line may come under pressure.

Carriers like Sprint are looking for an alternative microwave technology, dubbed as the ‘Next Generation Network’, to replace the more traditional backhaul system.

Also, owing to its expansive international presence, Crown Castle is highly exposed to currency exchange-rate risks.

However, the company’s extensive tower portfolio, increased demand for infrastructure, healthy leasing activity, continual buyout of towers and growing demand for mobile broadband act as major positives. The deployment of 5G network should drive growth of its tower and small cell assets as the wireless carriers look to expand and enhance their networks.

Earnings Whispers

Our proven model does not conclusively show that Crown Castle is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.