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SBA Communications (SBAC) Beats Q2 AFFO & Revenue Estimates

SBA Communications Corporation SBAC delivered solid second-quarter 2020 results, wherein the adjusted funds from operations (AFFO) and the top line increased year over year, and surpassed the Zacks Consensus Estimate.

AFFO per share of $2.29 for the second quarter surpassed the Zacks Consensus Estimate of $2.23. Further, the reported figure was 9.6% higher than the prior-year quarter’s $2.09.

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.

Quarterly total revenues increased 1.4% year over year to $ 507.2 million and outpaced the consensus estimate of $503.55 million. The upswing resulted from strong growth in site-leasing revenues.

Quarter in Detail

Site-leasing revenues increased 5.1% year over year to $482.4 million. This consisted of domestic site-leasing revenues of $388 million and international site-leasing revenues of $94.4 million. Domestic cash site-leasing revenues were $387.1 million, up 5.6% year over year. International cash site-leasing revenues were $95 million, up 6.2% year over year. Site-leasing operating profit was $390.8 million, marking an increase of 6.9% year over year. However, site development revenues plunged 39.7% to $24.8 million.

Overall operating income improved to $157.1 million from the year-ago quarter’s $136.4 million.

Adjusted EBITDA totaled $368.8 million, up 6.2% year over year, while adjusted EBITDA margin improved to 72.8% from the year-earlier quarter’s 69.8%.

During the June-end quarter, the company acquired 16 communication sites for a total cash consideration of $13.4 million. It also built 79 towers during this period. The company owned or operated 32,610 communication sites as of Jun 30, 2020. Of these, 16,478 sites are located in the United States and its territories, and 16,132 internationally.

SBA Communications also spent $12.9 million to purchase land and easements, and extend lease terms. Markedly, total cash capital expenditure was $57.2 million in the reported quarter, of which $8.3 million was non-discretionary and $48.9 million represented discretionary.

Cash Flow & Liquidity

During the second quarter of 2020, the company generated $314.7 million of net cash from operations compared with the year-ago quarter’s $258.7 million. As of Jun 30, 2020, it had $475 million in cash and equivalents, with $10.7 billion of net debt.

During the reported quarter, the company did not repurchase any shares under its $1-billion stock repurchase plan. As of the date of filing, it had $424.3 million of authorization remaining under the plan. Further, the company paid out a cash dividend of $52 million in second-quarter 2020.

Outlook

SBA Communications revised its guidance and now expects 2020 AFFO per share of $8.94-$9.33 compared with $8.89-$9.29 mentioned earlier. The Zacks Consensus Estimate for the same is currently pinned at $9.25.

The company expects total revenues of $2,047-$2,087 million as compared to the previously mentioned $2,040-$2,080 million. Site-leasing revenues are expected to be $1,937-$1,957 million, and site development revenues are likely to be between $110 million and $130 million. Moreover, adjusted EBITDA is projected between $1,471 million and $1,491 million.

Dividend Update

On Aug 3, SBA Communications announced a quarterly cash dividend of 46.5 cents on its Class A common stock. The dividend will be paid out on Sep 22 to shareholders of record as of the close of business on Aug 25, 2020.

Conclusion

Amid an increase in data volume as well as the deployment of 5G network and additional spectrum, wireless carriers are expanding and enhancing their networks. This is driving the company’s site-leasing business. Moreover, the expansion of its tower portfolio to capitalize on the trend also bodes well for long-term growth.

SBA Communications currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SBA Communications Corporation Price, Consensus and EPS Surprise

 

SBA Communications Corporation Price, Consensus and EPS Surprise

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

We now look forward to the earnings release of Public Storage PSA, Healthcare Trust of America, Inc. HTA and National Storage Affiliates Trust NSA. While Public Storage is set to report quarterly numbers on Aug 5, Healthcare Trust of America and National Storage Affiliates Trust are slated to release results on Aug 6.

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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