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Why Is SBA Communications (SBAC) Down 1.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for SBA Communications (SBAC - Free Report) . Shares have lost about 1.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is SBA Communications due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

SBA Communications Beats Q2 AFFO & Revenue Estimates

SBA Communications delivered solid second-quarter 2020 results, wherein the adjusted FFO (AFFO) and the top line increased year over year, and surpassed the Zacks Consensus Estimate.

AFFO per share of $2.29 for the second quarter surpassed the Zacks Consensus Estimate of $2.23. Further, the reported figure was 9.6% higher than the prior-year quarter’s $2.09.

Results reflected solid operating performance in its site leasing business. The company continues to benefit from the addition of sites to its portfolio. Demand in international markets also remained robust.

Quarterly total revenues increased 1.4% year over year to $507.2 million and outpaced the consensus estimate of $503.55 million. The upswing resulted from strong growth in site-leasing revenues.

Quarter in Detail

Site-leasing revenues increased 5.1% year over year to $482.4 million. This consisted of domestic site-leasing revenues of $388 million and international site-leasing revenues of $94.4 million. Domestic cash site-leasing revenues were $387.1 million, up 5.6% year over year. International cash site-leasing revenues were $95 million, up 6.2% year over year. Site-leasing operating profit was $390.8 million, marking an increase of 6.9% year over year. However, site development revenues plunged 39.7% to $24.8 million.

Overall operating income improved to $157.1 million from the year-ago quarter’s $136.4 million.

Adjusted EBITDA totaled $368.8 million, up 6.2% year over year, while adjusted EBITDA margin improved to 72.8% from the year-earlier quarter’s 69.8%.

During the June-end quarter, the company acquired 16 communication sites for a total cash consideration of $13.4 million. It also built 79 towers during this period. The company owned or operated 32,610 communication sites as of Jun 30, 2020. Of these, 16,478 sites are located in the United States and its territories, and 16,132 internationally.

SBA Communications also spent $12.9 million to purchase land and easements, and extend lease terms. Markedly, total cash capital expenditure was $57.2 million in the reported quarter, of which $8.3 million was non-discretionary and $48.9 million represented discretionary.

Cash Flow & Liquidity

During the second quarter of 2020, the company generated $314.7 million of net cash from operations compared with the year-ago quarter’s $258.7 million. As of Jun 30, 2020, it had $475 million in cash and equivalents, with $10.7 billion of net debt.

During the reported quarter, the company did not repurchase any shares under its $1-billion stock repurchase plan. As of the date of filing, it had $424.3 million of authorization remaining under the plan. Further, the company paid out a cash dividend of $52 million in second-quarter 2020.

Outlook

SBA Communications revised its guidance and now expects 2020 AFFO per share of $8.94-$9.33 compared with $8.89-$9.29 mentioned earlier.

The company expects total revenues of $2,047-$2,087 million as compared to the previously mentioned $2,040-$2,080 million. Site-leasing revenues are expected to be $1,937-$1,957 million, and site development revenues are likely to be between $110 million and $130 million. Moreover, adjusted EBITDA is projected between $1,471 million and $1,491 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, SBA Communications has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, SBA Communications has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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