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Why Is SBA Communications (SBAC) Down 1% Since Last Earnings Report?

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A month has gone by since the last earnings report for SBA Communications (SBAC - Free Report) . Shares have lost about 1% 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 the most recent earnings report in order to get a better handle on the important catalysts.

SBA Communications Misses Q2 Earnings & Revenues

SBA Communications reported lackluster second-quarter 2018 results, missing both top- and bottom-line estimates. Net loss for the reported quarter was $57.4 million or loss of 50 cents per share against net income of $9.2 million or 8 cents per share in the year-ago quarter. Despite higher revenues, earnings decreased year over year due to higher operating costs, interest expenses and adverse foreign currency translation. Adjusted earnings for the quarter were a penny per share, which missed the Zacks Consensus Estimate of 18 cents.

Revenues

Total revenues increased 6.8% year over year to $456.3 million, missing the Zacks Consensus Estimate of $457 million. The top-line growth was supported by positive results in both domestic and international leasing operations as well as incremental contributions from services business.

During the second quarter, the company expanded its portfolio, investing incremental capital in both new tower builds and acquisitions. It acquired 224 communication sites for $152.3 million, bulk of which were located in the domestic shores and also built 87 sites during the quarter. Subsequent to the quarter end, the company acquired 23 additional communication sites at an aggregate price of $5 million.

The company has 867 additional sites under contract for acquisition at an aggregate price of $168.9 million, including the previously announced 811 sites located in El Salvador to be purchased from a local subsidiary of Millicom International. The company anticipates these deals to close by the end of 2018.

Segmental Performance

Quarterly revenues from site leasing business increased 6.7% year over year to $429.9 million. Domestic site leasing revenues totaled $346.7 million. Domestic cash site leasing revenues were $343.5 million compared with $325 million in the year-ago period.

International site leasing revenues came in at $83.2 million. International cash site leasing revenues were $81.3 million compared with $73.8 million in the year-earlier period. Segment operating profit was $336.2 million, which marks an increase of 7.2% from the year-ago quarter.

Quarterly revenues from site development increased 8.8% year over year to $26.4 million.

Operating Metrics

Operating income improved to $125.9 million from $114.6 million in the year-ago quarter. Total operating expenses increased to $330.5 million from $312.7 million. Adjusted EBITDA in the reported quarter was $318.9 million, increasing 6.7% year over year on the back of solid results from both leasing and services businesses. Adjusted EBITDA margin was 70.7% compared with 70.6% in the year-ago quarter.

Cash Flow & Liquidity

During the reported quarter, SBA Communications generated $248 million of cash from operations compared with $231.9 million in the prior-year quarter. At the end of the quarter, the company had $134.7 million of cash and cash equivalents while net long-term debt was $9,675.7 million. In addition, SBA Communications had $90.0 million outstanding under the $1.25 billion revolving credit facility.

Share Repurchase

During the reported quarter, the company repurchased 1.9 million shares for $306.9 million, at an average price of $163.44 per share. At the quarter end, the company had $654.5 million worth of shares available under its $1 billion share repurchase plan.

Outlook Revised

SBA Communications updated its earlier guidance for full-year 2018 to better reflect its current business operations and foreign currency impact. The company currently expects site leasing revenues in the range of $1,719-$1,739 million, down from $1,727-$1,747 million expected earlier. Adjusted EBITDA is anticipated between $1,278 million and $1,298 million compared to previous expectation of $1,282-$1,302 million. AFFO (adjusted fund from operations) per share is expected to be between $7.21 and $7.62, down from $7.25 and $7.66.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, SBA Communications has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

The company's stock is suitable solely for growth based on our style scores.

Outlook

Estimates have been broadly trending upward 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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