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What's in Store for SBA Communications (SBAC) in Q4 Earnings?

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SBA Communications Corporation (SBAC - Free Report) is scheduled to report fourth-quarter and full-year 2023 results on Feb 26 after market close. While the company’s quarterly results might display a slight decline in revenues year over year, adjusted funds from operations (AFFO) per share are expected to grow.

This Boca Raton, FL-based communications tower REIT delivered a surprise of 3.41% in terms of AFFO per share in the last reported quarter. SBAC’s site-leasing revenues improved year over year on healthy leasing activity amid elevated tower space demand. Moreover, it has continued to benefit from the addition of sites to its portfolio.

Over the preceding four quarters, SBAC’s AFFO per share surpassed the Zacks Consensus Estimate on three occasions and missed once, the average beat being 1.65%. The graph below depicts this surprise history:

Factors at Play

During the fourth quarter, SBA Communications is likely to have benefited from the secular growth trends of the wireless industry. With the advancement in mobile technology, such as 4G and 5G networks, and the proliferation of bandwidth-intensive applications, mobile data usage has increased significantly globally. The extensive use of network-intensive applications for activities like video conferencing and cloud services, coupled with the prevalence of hybrid work arrangements, has further contributed to this upward trend.

Consequently, wireless carriers have increased their capital investments due to the growing demand resulting from global initiatives to roll out 4G and 5G networks, the expanding reach of wireless services and spectrum auctions. This heightened investment has supported the demand for SBA Communications' wireless communication infrastructure. This positive trend is likely to have stimulated robust tower leasing activities in the quarter, thereby enhancing the company's earnings for the period.

Moreover, SBAC’s long-term (typically five to 10 years) tower leases with wireless service providers that have built-in rent escalators are likely to have supported stable site-leasing revenues for the company in the quarter, boosting its top line.

SBAC’s solid balance sheet position is expected to have supported its investments in the existing 4G networks and efforts for 5G deployment. Also, asset-base expansion through acquisitions and development activities is likely to have given it an edge.

The Zacks Consensus Estimate for fourth-quarter site-leasing revenues, which account for the lion’s share of total revenues, is pegged at $640.45 million, indicating an increase from the year-ago quarter’s $609.61 million.

However, site-development revenues are expected to be on the lower side in the fourth quarter. The consensus mark stands at $43.68 million, implying a decline from $76.49 million reported in the year-ago period.

The Zacks Consensus Estimate for total quarterly revenues is pegged at $683.81 million, calling for a slight year-over-year decline of 0.33%.

The company’s activities during the to-be-reported quarter were adequate to garner analysts’ confidence. The Zacks Consensus Estimate for quarterly AFFO per share has been revised marginally upward to $3.32 over the past three months. Moreover, the figure implies year-over-year growth of 6.75%.

However, high interest expenses and elevated churn in certain markets where the company operates might have been a deterrent for SBAC’s quarterly performance to some extent.

For 2023, SBAC projected AFFO per share in the range of $12.91-$13.13. The company expected site-leasing revenues in the band of $2.51-$2.52 billion, site-development revenues between $195 million and $205 million and adjusted EBITDA in the range of $1.886-$1.896 billion.

For the full year, the Zacks Consensus Estimate for AFFO per share has been revised a cent upward to $13.02 over the past month. The figure also indicates a 6.37% increase from the year-ago reported figure. The Zacks Consensus Estimate for 2023 revenues is pegged at $2.72 billion, indicating growth of 3.30% from the year-ago reported number.

Here Is What Our Quantitative Model Predicts:

Our proven model predicts a surprise in terms of AFFO per share for SBA Communications this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an AFFO beat, which is the case here.

SBA Communications currently has a Zacks Rank of 3 and an Earnings ESP of +0.26%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Another Stock That Warrants a Look

Our model shows that Extra Space Storage Inc. (EXR - Free Report) also has the right combination of elements to report a surprise this quarter.

Extra Space Storage, scheduled to report quarterly numbers on Feb 27, has an Earnings ESP of +0.70% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Performance of Another REIT

Crown Castle Inc. (CCI - Free Report) reported fourth-quarter 2023 AFFO per share of $1.82, outpacing the Zacks Consensus Estimate of $1.79. However, the reported figure declined 1.6% from the year-ago quarter. Results reflected better-than-anticipated revenues aided by healthy site-rental revenue growth. However, higher interest expenses on debt obligations and lower contributions from adjusted EBITDA were undermining factors. CCI maintained its outlook for 2024.

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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