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What's in the Cards for SBA Communications' (SBAC) Q2 Earnings?

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SBA Communications Corporation (SBAC - Free Report) is scheduled to report second-quarter 2021 results on Aug 2, after market close. The company’s results are expected to reflect year-over-year growth in quarterly revenues and funds from operations (FFO) per share.

In the previous quarter, this Boca Raton, FL-based communications tower REIT delivered a surprise of 5.3% in terms of adjusted FFO per share. Results reflected solid operating performance in its site-leasing as well as development businesses. It also benefited from the addition of sites to its portfolio.

Over the preceding four quarters, SBA Communications topped the FFO per share estimate on all occasions, the average beat being 3.16%. The graph below depicts this surprise history:

Let’s see how things have shaped up prior to this announcement.

Factors at Play

During the second quarter, tower REITs like SBA Communications, Crown Castle International Corp (CCI - Free Report) and American Tower Corp (AMT - Free Report) are likely to have benefited from secular growth trends in the wireless industry.

As data volume for wireless and wired networks has been growing rapidly amid the widespread adoption of smartphones and applications, network carriers continued their spending on network deployments during the second quarter in a bid to harness spectrum abilities, as well as improve and densify cell sites and coverage.

Long-term (typically 5-15 year) tower lease agreements that have built-in rent escalators are anticipated to have contributed to recurring site rentals during the June-end quarter. The consensus estimate second-quarter site-leasing revenues, which account for the lion’s share of the total revenues, is pegged at $518 million, suggesting 7.5% year-over-year growth.

With a ramp-up in 5G-related investments, the timing of the C-Band spectrum activity from some large customers and initial leasing contributions from the DISH Network Corporation agreement, SBA Communications’ top line is anticipated to have witnessed healthy growth during the quarter under review.

Further, acquisitions and developments during the prior quarters are likely to have expanded the asset base and aided revenue generation in the quarter in discussion. Subsequent to the first-quarter 2021 end, it has purchased or agreed to purchase 413 communication sites for $110.2 million. This too is expected to have driven the company’s second-quarter site-leasing revenues.

SBA Communications’ site-development business is also likely to have gained from increasing deployment by wireless service providers, as the company assists in developing these networks. Revenues from site-development operations are estimated to be $41.14 million, indicating an increase of 65.8% from the year-ago period.

As such, the consensus estimate for second-quarter total revenues is pegged at $561.3 million. This indicates year-over-year growth of 10.7%.

The company’s activities during the quarter were inadequate to gain adequate analyst confidence. The Zacks Consensus Estimate for second-quarter FFO per share has remained unchanged at $2.59 over the past month. Nonetheless, it suggests year-over-year growth of 13.1%.

Here is what our quantitative model predicts:

SBA Communications does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an FFO beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for SBA Communications is 0.00%.

Zacks Rank: It currently carries a Zacks Rank of 4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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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American Tower Corporation (AMT) - free report >>

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SBA Communications Corporation (SBAC) - free report >>

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