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Why Is SBA Communications (SBAC) Up 6.6% 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 added about 6.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is SBA Communications due for a pullback? 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 drivers.
SBA Communications Q2 AFFO & Revenues Beat, View Up
SBA Communications reported solid second-quarter 2019 results, wherein both the bottom line and the top line increased year over year, and surpassed the respective Zacks Consensus Estimate.
Net Income
On a GAAP basis, net income for the June quarter was $32 million or 28 cents per share against net loss of $57.4 million or loss of 50 cents per share in the year-ago quarter, primarily driven by top-line growth and lower expenses.
Adjusted funds from operations (AFFO) were $240.1 million or $2.09 per share compared with $213.5 million or $1.83 per share in the year-earlier quarter. The bottom line beat the Zacks Consensus Estimate by 6 cents.
Revenues
Quarterly total revenues increased 9.6% year over year to $500.1 million, surpassing the consensus estimate of $492 million. The top-line growth was supported by strong activity in both leasing and services segments.
Segment Results
Revenues from Site Leasing increased 6.8% year over year to $459 million. Domestic site leasing revenues totaled $369.2 million. Domestic cash site leasing revenues were $366.7 million compared with $343.5 million in the year-ago quarter. International site leasing revenues came in at $89.8 million. International cash site leasing revenues were $89.4 million compared with $81.3 million a year ago. The segment’s operating profit was $365.5 million, which marks an increase of 8.7%. Revenues from Site Development improved 55.7% to $41.1 million.
Other Details
Total operating expenses increased to $363.7 million from $330.5 million. Overall operating income improved to $136.5 million from $125.9 million in the year-ago quarter. Adjusted EBITDA totaled $347.2 million, up 8.9% on the back of healthy performance in both leasing and services businesses. Adjusted EBITDA margin fell to 69.8% from 70.7% year over year.
As of Jul 29, 2019, SBA Communications had no amount available under the $1.25 billion revolving credit facility. During the reported quarter, it repurchased 0.5 million shares for $94.6 million at an average price of $204.06 per share. Further, the company’s board of directors announced its first cash dividend of 37 cents per share, to be paid out on Sep 25, 2019 to shareholders as of Aug 28, 2019.
Notable Developments
During the second quarter, the communications tower operator expanded its portfolio, investing incremental capital in new tower builds, tower augmentations, and purchase of land and easements. It purchased 82 communication sites for $83 million in cash, and built 87 towers during the quarter. As of Jun 30, 2019, the company owned or operated 29,845 communication sites, of which, 16,371 are located in the United States and its territories.
SBA Communications also spent $12.6 million to purchase land and easements, and to extend lease terms. Markedly, for the second quarter, total cash capital expenditures were $132.3 million, of which $8.6 million was non-discretionary and $123.7 million represented discretionary. Subsequent to the quarter end, the company acquired 59 communication sites for $17.9 million in cash. In addition, it has agreed to purchase 125 additional sites for $45.7 million, and expects to close a majority of them by the end of first-quarter 2020. Moreover, in the ongoing quarter, the company intends to close the acquisition of 94% of a previously unconsolidated joint venture in South Africa, which is currently operated under the name Atlas Tower South Africa. SBA Communications aims to increase investment in and consolidate Atlas Tower South Africa, adding about 900 sites and a substantial backlog of new tower builds.
Cash Flow & Liquidity
During the second quarter of 2019, SBA Communications generated $258.8 million of net cash from operations compared with $248 million in the year-ago quarter. As of Jun 30, 2019, the company had $101.8 million in cash and equivalents with $8,749.5 million of net long-term debt.
2019 View Raised
SBA Communications has updated its outlook for full-year 2019, which assumes an average foreign currency exchange rate of R$3.80 to $1, C$1.30 to $1, and R14.2 to $1. The company currently expects total revenues in the range of $1,974-$2,014 million (up from previous expectation of $1,943-$1,983 million), of which site leasing revenues are expected in the band of $1,844-$1,864 million (up from $1,823-$1,843 million), and site development revenues between $130 million and $150 million (up from $120 million and $140 million). Adjusted EBITDA is anticipated between $1,395 million and $1,415 million (up from $1,379 million and $1,399 million). While AFFO is expected to be $943-$989 million (up from $922-$973 million), AFFO per share is projected between $8.20 and $8.60 (up from $8.02 and $8.47).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, SBA Communications has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise SBA Communications has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is SBA Communications (SBAC) Up 6.6% Since Last Earnings Report?
A month has gone by since the last earnings report for SBA Communications (SBAC - Free Report) . Shares have added about 6.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is SBA Communications due for a pullback? 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 drivers.
SBA Communications Q2 AFFO & Revenues Beat, View Up
SBA Communications reported solid second-quarter 2019 results, wherein both the bottom line and the top line increased year over year, and surpassed the respective Zacks Consensus Estimate.
Net Income
On a GAAP basis, net income for the June quarter was $32 million or 28 cents per share against net loss of $57.4 million or loss of 50 cents per share in the year-ago quarter, primarily driven by top-line growth and lower expenses.
Adjusted funds from operations (AFFO) were $240.1 million or $2.09 per share compared with $213.5 million or $1.83 per share in the year-earlier quarter. The bottom line beat the Zacks Consensus Estimate by 6 cents.
Revenues
Quarterly total revenues increased 9.6% year over year to $500.1 million, surpassing the consensus estimate of $492 million. The top-line growth was supported by strong activity in both leasing and services segments.
Segment Results
Revenues from Site Leasing increased 6.8% year over year to $459 million. Domestic site leasing revenues totaled $369.2 million. Domestic cash site leasing revenues were $366.7 million compared with $343.5 million in the year-ago quarter. International site leasing revenues came in at $89.8 million. International cash site leasing revenues were $89.4 million compared with $81.3 million a year ago. The segment’s operating profit was $365.5 million, which marks an increase of 8.7%. Revenues from Site Development improved 55.7% to $41.1 million.
Other Details
Total operating expenses increased to $363.7 million from $330.5 million. Overall operating income improved to $136.5 million from $125.9 million in the year-ago quarter. Adjusted EBITDA totaled $347.2 million, up 8.9% on the back of healthy performance in both leasing and services businesses. Adjusted EBITDA margin fell to 69.8% from 70.7% year over year.
As of Jul 29, 2019, SBA Communications had no amount available under the $1.25 billion revolving credit facility. During the reported quarter, it repurchased 0.5 million shares for $94.6 million at an average price of $204.06 per share. Further, the company’s board of directors announced its first cash dividend of 37 cents per share, to be paid out on Sep 25, 2019 to shareholders as of Aug 28, 2019.
Notable Developments
During the second quarter, the communications tower operator expanded its portfolio, investing incremental capital in new tower builds, tower augmentations, and purchase of land and easements. It purchased 82 communication sites for $83 million in cash, and built 87 towers during the quarter. As of Jun 30, 2019, the company owned or operated 29,845 communication sites, of which, 16,371 are located in the United States and its territories.
SBA Communications also spent $12.6 million to purchase land and easements, and to extend lease terms. Markedly, for the second quarter, total cash capital expenditures were $132.3 million, of which $8.6 million was non-discretionary and $123.7 million represented discretionary. Subsequent to the quarter end, the company acquired 59 communication sites for $17.9 million in cash. In addition, it has agreed to purchase 125 additional sites for $45.7 million, and expects to close a majority of them by the end of first-quarter 2020. Moreover, in the ongoing quarter, the company intends to close the acquisition of 94% of a previously unconsolidated joint venture in South Africa, which is currently operated under the name Atlas Tower South Africa. SBA Communications aims to increase investment in and consolidate Atlas Tower South Africa, adding about 900 sites and a substantial backlog of new tower builds.
Cash Flow & Liquidity
During the second quarter of 2019, SBA Communications generated $258.8 million of net cash from operations compared with $248 million in the year-ago quarter. As of Jun 30, 2019, the company had $101.8 million in cash and equivalents with $8,749.5 million of net long-term debt.
2019 View Raised
SBA Communications has updated its outlook for full-year 2019, which assumes an average foreign currency exchange rate of R$3.80 to $1, C$1.30 to $1, and R14.2 to $1. The company currently expects total revenues in the range of $1,974-$2,014 million (up from previous expectation of $1,943-$1,983 million), of which site leasing revenues are expected in the band of $1,844-$1,864 million (up from $1,823-$1,843 million), and site development revenues between $130 million and $150 million (up from $120 million and $140 million). Adjusted EBITDA is anticipated between $1,395 million and $1,415 million (up from $1,379 million and $1,399 million). While AFFO is expected to be $943-$989 million (up from $922-$973 million), AFFO per share is projected between $8.20 and $8.60 (up from $8.02 and $8.47).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, SBA Communications has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise SBA Communications has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.