Is a Beat in Store for SBA Communications' (SBAC) Q2 Earnings?

SBA Communications Corporation SBAC is scheduled to report second-quarter 2020 results on Aug 3, 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 0.88% in terms of FFO per share. Results reflected 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.

For the trailing four quarters, SBA Communications has an impressive surprise history, having beaten estimates on each occasion, the surprise being 2.04%, 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

Navigating the challenges of the coronavirus outbreak, many companies embraced remote working. Further, the pandemic has propelled a sharp increase in online purchases. Hence, the ‘stay-at-home’ economy has highlighted the urgent need for 5G network, accelerating the build-out of 5G wireless networks.

Moreover, higher data usage has compelled network carriers to increase spending to address network capacity issues during the quarter under review. These are anticipated to have driven demand for communication towers, leading to stronger leasing activity for cell tower REITs in the second quarter.

As for SBA Communications, with a significant portion of its quarterly revenues coming from wireless service providers, the company is expected to have benefitted from higher investments by such customers. This is expected to have driven its second-quarter site leasing activities in the United States.

In fact, the Zacks Consensus Estimate for second-quarter domestic site leasing revenues is pinned at $385 million, indicating a 4.3% increase from the prior year’s reported figure.  Moreover, international site leasing revenues are expected to increase 8.9% year over year to $98 million.

This is expected to have driven growth in total site leasing revenues. The Zacks Consensus Estimate for site-leasing revenues, which account for the lion’s share of total revenues, is pegged at $479 million, suggesting a 4.3% rise from the year-ago quarter’s reported figure.

Nonetheless, revenues from site development operations are estimated to witness a continued decline, falling 41% year over year to $24.28 million. This is likely to have limited total revenues growth to 0.7%. The estimate for the same is pegged at $503.5 million.

Additionally, SBA Communications’ resilient site-leasing business model with built-in rent escalators is expected to have propelled higher operating profits in its site leasing operations. The consensus estimate for the same for the second quarter is pinned at $385 million, suggesting a year-over-year increase of 5.2%.

Also, prior to its quarterly earnings release, the company has been witnessing upward estimate revisions. As such, the Zacks Consensus Estimate for second-quarter FFO per share has been revised marginally upward to $2.23 over the past month, reflecting analysts’ bullish sentiments. Additionally, it suggests year-over-year growth of 6.7%.

Here is what our quantitative model predicts:

Our proven model predicts a beat in terms of FFO 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 odds of a FFO beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

SBA Communications currently carries a Zacks Rank of 3 and has an Earnings ESP of +4.48%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks That Warrant a Look

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

Healthcare Trust of America, Inc. HTA, set to report quarterly numbers on Aug 6, currently has an Earnings ESP of +1.21% and a Zacks Rank of 3.

Digital Realty Trust DLR, slated to release second-quarter earnings on Jul 30, has an Earnings ESP of +1.55% and a Zacks Rank of 3 at present.

National Storage Affiliates Trust NSA, set to report quarterly numbers on Aug 6, currently has an Earnings ESP of +0.44% and a Zacks Rank of 3.

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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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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