Shares of SBA Communications SBAC have rallied 10.4% year to date, outperforming the industry's upside of 6%.
Last month, this tower REIT reported fourth-quarter 2024 adjusted funds from operations (AFFO) per share of $3.47, beating the Zacks Consensus Estimate of $3.37. The figure also improved 3% from the prior-year quarter. The results reflected an improvement in site-leasing and site-development revenues during the quarter.
Analysts seem positive about this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its first-quarter 2025 FFO per share has been revised marginally northward to $3.22 over the past two months.
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Factors Behind SBAC Stock Price Rise: Will This Trend Last?
With increasing smartphone adoption, greater broadband demand and plans for 5G service worldwide, wireless service providers and carriers have been deploying additional equipment for existing networks to enhance network coverage and capacity. SBA Communications’ portfolio of extensive infrastructure assets is well-poised to capitalize on this upbeat trend.
SBA Communications has a resilient and stable site-leasing business model. The company generates most of its revenues from long-term (typically five to 10 years) tower leases that have built-in rent escalators. With high operating margins, its tower-leasing business remains attractive. The company also offers wireless service providers assistance in developing and maintaining their networks. Given the vast array of services the company offers due to its extensive site development experience, it is likely to propel its growth over the long term.
SBA Communications continues to expand its business into domestic and select international markets with high growth characteristics. In the fourth quarter, SBAC acquired seven communication sites for a total cash consideration of $1.3 million. The company also built 159 towers during this period. Such portfolio expansion efforts will position SBA Communications to leverage secular trends in mobile data usage and wireless spending growth worldwide.
SBA Communications has decent balance sheet strength and sufficient liquidity. As of Dec. 31, 2024, it had $1.7 billion in cash and cash equivalents, short-term restricted cash and short-term investments. As of Feb. 24, 2025, SBAC had no amount outstanding under the $2 billion revolving credit facility. A robust balance sheet and operational strength provide flexibility to the company to be opportunistic regarding future investment choices.
Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and SBA Communications remains committed to that. The company has increased its dividend five times in the last five years, and its five-year annualized dividend growth rate is 19.75%. Given SBA Communications’ decent financial position and lower-than-industry dividend payout rate, the dividend distribution is expected to be sustainable over the long run.
Key Risks for SBAC
High customer concentration and the ongoing consolidation in the wireless industry are concerns for the company’s top-line growth. Elevated interest rates add to the company’s woes.
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are Ventas VTR and Cousins Properties CUZ,each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ventas’ 2025 FFO per share has been raised marginally northward to 3.41 over the past week.
The Zacks Consensus Estimate for Cousins Properties’ 2025 FFO per share has been raised marginally upward to 2.76 over the past week.
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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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
