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What's in Store for SBA Communications (SBAC) in Q1 Earnings?

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SBA Communications Corporation (SBAC - Free Report) is scheduled to report first-quarter 2024 results on Apr 29, after market close. While the company’s quarterly results may display a slight decline in revenues year over year, adjusted funds from operations (AFFO) per share is expected to grow.

This Boca Raton, FL-based communications tower REIT delivered a surprise of 1.51% in terms of AFFO per share in the last reported quarter. SBAC’s site-leasing revenues improved year over year. However, site development posted lower revenues, which affected the top line to some extent.

Over the preceding four quarters, SBAC’s AFFO per share surpassed the Zacks Consensus Estimate on all four occasions, the average beat being 2.19%. The graph below depicts this surprise history:



Factors at Play

During the first 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.

Consequently, wireless carriers have increased their capital investments due to the growing demand resulting from global initiatives to roll out 5G networks. This heightened investment has supported the demand for SBA Communications' wireless communication infrastructure in the past quarters. 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 first-quarter site-leasing revenues, which account for the lion’s share of total revenues, is pegged at $635.43 million, indicating an increase from the year-ago quarter’s $617.27 million.

However, site-development revenues are expected to be on the lower side in the first quarter due to an anticipated decrease in carrier activities. The consensus mark stands at $35.93 million, implying a decline from $58.25 million reported in the year-ago period.

The Zacks Consensus Estimate for total quarterly revenues is pegged at $673.98 million, calling for a slight year-over-year decline of 0.23%.

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.

The company’s activities in the to-be-reported quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for quarterly AFFO per share has remained unrevised at $3.30 over the past month. However, the figure implies year-over-year growth of 5.43%.

What Our Quantitative Model Predicts

Our proven model does not conclusively predict 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 not the case here.

SBA Communications currently has an Earnings ESP of 0.00% and a Zacks Rank of 3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

A Stock That Warrants a Look

Here is one stock from the broader REIT sector — Welltower (WELL - Free Report) — you may want to consider, as our model shows that it has the right combination of elements to report a surprise this quarter.

Welltower, scheduled to report quarterly numbers on Apr 29, has an Earnings ESP of +1.53% 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 first-quarter 2024 AFFO per share of $1.72, outpacing the Zacks Consensus Estimate by a penny. However, the reported figure declined 9.9% from the year-ago quarter.

Results reflected better-than-anticipated revenues. However, higher interest expense 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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