Factors Affecting SBA Communications' (SBAC) Q3 Earnings

SBA Communications Corporation SBAC is scheduled to report third-quarter 2020 results on Nov 2, after the closing bell. The company’s results are expected to reflect year-over-year increases in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Boca Raton, FL-based communications tower REIT delivered a surprise of 2.7% in terms of FFO per share. Results reflected a solid operating performance in its site leasing business. The company continues to benefit from the addition of sites to its portfolio. Demand in international markets also remained robust.

In the trailing four quarters, SBA Communications surpassed estimates on three occasions and met in the other, the surprise being 1.97%, on average. The graph below depicts this surprise history:

SBA Communications Corporation Price and EPS Surprise


SBA Communications Corporation Price and EPS Surprise

SBA Communications Corporation price-eps-surprise | SBA Communications Corporation Quote

Let’s see how things are shaping up for this announcement.

Factors at Play

Amid the rollout of the latest technologies and significant growth in the overall network utilization, carriers have continued to spend capital to increase coverage and capacity in the United States. Moreover, remote working and online purchases amid the pandemic are likely to have increased the demand for cellular data.

This has acted as a catalyst for cell tower REITs that play a pivotal role in providing critical infrastructures needed for a seamless connection. These narratives indicate a healthy domestic tower leasing environment in the third quarter for SBA Communications.

Moreover, the company has been making continued efforts expand its tower portfolio into select markets with high growth characteristics on the back of acquisitions and development. This has positioned it well to benefit from high demand for towers. It is expected to have driven the company’s third-quarter site leasing revenues.

In fact, the Zacks Consensus Estimate for third-quarter site leasing revenues, which account for the lion’s share of the total revenues, is pinned at $485 million, indicating a 3.4% increase from the prior year’s reported figure.

As such, the estimate for third-quarter total revenues is pinned at $516.7 million. This indicates year-over-year growth of 1.8%.

Moreover, the company’s long-term leases and embedded rent escalators are anticipated to have supported tower-leasing business resilience. The consensus estimate for the same for the third quarter is pinned at $392 million, suggesting a year-over-year increase of 4.3%.

However, a decline in consulting and construction-related carrier activities is likely to have hurt site-development revenues for the September-end quarter. Notably, revenues from site-development operations are estimated to witness a decline, falling 17.8% year over year to $32 million.

Lastly, the company’s activities during the quarter were inadequate to gain adequate analyst confidence. Notably, the Zacks Consensus Estimate for third-quarter FFO per share has been unchanged at $2.32 over the past month. Nonetheless, it suggests year-over-year growth of 7.9%.

Here is what our quantitative model predicts:

SBA Communications does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of a 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: American Tower currently carries a Zacks Rank of 3.

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

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a beat this quarter:

Lexington Realty Trust LXP, set to report quarterly numbers on Nov 5, currently has an Earnings ESP of +1.33% and a Zacks Rank of 3.

National Storage Affiliates Trust NSA, slated to release third-quarter earnings on Nov 5, has an Earnings ESP of +1.94% and a Zacks Rank of 2 (Buy) at present.

Ventas, Inc. VTR, slated to release third-quarter earnings on Nov 6, has an Earnings ESP of +2.03% and a Zacks Rank of 3 at present.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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