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SBA Communications (SBAC) Beats Q3 AFFO & Revenue Estimates

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SBA Communications Corporation (SBAC - Free Report) delivered solid third-quarter 2020 results, wherein the adjusted funds from operations (AFFO) and the top line increased year over year, as well as surpassed the respective Zacks Consensus Estimate.

The AFFO per share of $2.38 for the third quarter surpassed the Zacks Consensus Estimate of $2.32. Further, the reported figure is 10.7% 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 was also robust.

Quarterly total revenues increased 3% year over year to $522.9 million and outpaced the consensus estimate of $516.8 million. This upswing resulted from impressive growth in site-leasing revenues.

Quarter in Detail

Site-leasing revenues were up 3.9% year over year to $486.8 million. This consisted of domestic site-leasing revenues of $391 million and international site-leasing revenues of $95.8 million. Domestic cash site-leasing revenues came in at $389.6 million, up 4.9% year over year. International cash site-leasing revenues were $96.5 million, up 3.4% year over year. Site-leasing operating profit summed $394 million, marking an increase of 4.9% year over year. However, site development revenues slid 7.2% to $36.2 million.

Overall operating income improved to $160.3 million from the year-ago quarter’s $153.8 million.

Adjusted EBITDA totaled $373.3 million, up 5% year over year, while adjusted EBITDA margin inched up to 71.5% from the year-earlier quarter’s 70.6%.

During the September-end quarter, the company acquired 44 communication sites and one data center for a total cash consideration of $73.5 million. It also built 75 towers during this period. The company owned or operated 32,724 communication sites as of Sep 30, 2020. Of these, 16,495 sites are located in the United States and its territories, and 16,229 internationally.

SBA Communications also spent $7.2 million to purchase land and easements, and extend lease terms. Markedly, total cash capital expenditure was $109.3 million in the reported quarter, of which $8 million was non-discretionary and $101.3 million represented discretionary.

Cash Flow & Liquidity

During the third quarter of 2020, SBA Communications generated $290.5 million of net cash from operations compared with the year-ago quarter’s $238.9 million. As of Sep 30, 2020, it had $338.3 million in cash and equivalents, with $10.5 billion of net debt.

During the reported quarter, the company repurchased 0.6 million shares of its Class A common stock for $175.6 million at an average price per share of $302.63 under its $1-billion repurchase plan.

Further, it paid out a cash dividend of $52 million in third-quarter 2020.

On Nov 2, the company’s board of directors authorized a new $1-billion share-repurchase plan. This plan replaces the prior plan authorized on Jul 29, 2019, that had a remaining authorization of $124.3 million.

Outlook

SBA Communications revised its guidance and now expects 2020 AFFO per share of $9.27-$9.50 compared with the $8.94-$9.33 mentioned earlier.

The company expects total revenues of $2,065-$2,085 million compared with the previously estimated $2,047-$2,087 million. Site-leasing revenues are projected at $1,947-$1,957 million, and site development revenues are likely to be between $118 million and $128 million. Moreover, adjusted EBITDA is predicted between $1,485 million and $1,495 million.

Dividend Update

On Nov 2, SBA Communications announced a quarterly cash dividend of 46.5 cents on its Class A common stock. The dividend will be paid out on Dec 17 to shareholders of record as of the close of business on Nov 19, 2020.

Conclusion

Amid an increase in data volume as well as the deployment of 5G network and additional spectrum, wireless carriers are expanding and enhancing their networks. This is driving the company’s site-leasing business. Furthermore, the expansion of its tower portfolio to capitalize on the trend bodes well for long-term growth.

Subsequent to the third quarter, SBA Communications acquired 54 communication sites for a total price of $14.6 million in cash. In addition, the company has agreed to purchase and anticipates closing on 132 additional communication sites for a total price of $85 million. Management forecasts that the majority of these acquisitions will be concluded by the end of the first quarter of 2021.

SBA Communications currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITS

Boston Properties Inc.’s (BXP - Free Report) third-quarter 2020 FFO per share of $1.57 missed the Zacks Consensus Estimate of $1.64. The reported figure also decreased 4.3% from the year-ago quarter’s $1.64.

SITE Centers Corp.’s (SITC - Free Report) third-quarter operating FFO per share of 23 cents came in line with the Zacks Consensus Estimate. The reported figure, however, declined 23.3% year over year.

Highwoods Properties, Inc. (HIW - Free Report) third-quarter 2020 FFO per share of 86 cents missed the Zacks Consensus Estimate of 88 cents. The figure included 5 cents from debt extinguishment charges and non-cash straight-line credit losses. Nonetheless, the reported figure improved 3.6% from the 83 cents reported in the year-ago period.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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