NEW YORK-Bear Stearns & Co. Inc. has raised its wireless tower sector rating to “market overweight,” reflecting its confidence in the industry’s ability to continue financial deleveraging.
The analyst firm specifically raised its rating on Crown Castle International Inc. to “outperform” and its year-end 2004 price target on the company to $13. Bear Stearns expects the company’s free cash flow to continue to increase, reaching $182 million, or 73 cents per share, for 2005. Greater free cash flow will also allow the company to more rapidly reduce its net debt.
Bear Stearns believes the execution of business plans, reduced costs of debt, potential tower industry consolidation and the upcoming implementation of wireless local number portability represent catalysts for the tower sector. Meanwhile, lower-than-expected lease-up rates, high net leverage, potential wireless carrier consolidation and new technologies that reduce the need for incremental cell sites represent risks to the sector.
Tower company stocks showed gains early Tuesday, with Crown trading at $9.97, American Tower Corp. at $10.55, SpectraSite at $33.30 and SBA Communications Corp. at $3.39.
