SBA Communications (SBAC) Down 21.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for SBA Communications (SBAC). Shares have lost about 21.5% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is SBA Communications due for a breakout? 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 catalysts.

SBA Communications Q4 AFFO Tops Estimate, Dividend Up

SBA Communications delivered solid fourth-quarter 2019 results, wherein both bottom and top lines increased year over year, and topped the respective Zacks Consensus Estimate.

Adjusted funds from operations (AFFO) per share of $2.18 for the fourth quarter surpassed the Zacks Consensus Estimate of $2.16. The reported figure also came in higher than the prior-year quarter tally of $2.00.

Results reflect solid operating results in its site leasing business and the company continues to benefit from addition of sites to its portfolio. International markets also displayed impressive performance, specifically Brazil and South Africa. Moreover, the company has announced a 25.7% hike in its quarterly cash dividend.

Quarterly total revenues increased 6.2% year over year to $ 513.7 million, outpacing the consensus estimate of $506.4 million. This upswing resulted from strong site leasing business.

Quarter in Detail

Revenues from Site Leasing increased 8.2% year over year to $481.1 million. Domestic site leasing revenues totaled $380.4 million. Domestic cash site leasing revenues were $377.7 million, up 6% from the year-ago quarter’s $356.4 million. International site leasing revenues came in at $100.7 million. International cash site leasing revenues were $100.4 million, up 17.6% from the $85.4 million reported in the prior year. The segment’s operating profit was $386.3 million, marking an increase of 10% year on year. However, revenues from Site Development declined 16.7% to $32.6 million.

Overall operating income improved to $153.9 million from the year-ago quarter’s $150.3 million.

Adjusted EBITDA totaled $362.4 million, up 6.8% year on year, while adjusted EBITDA margin improved to 71% from the year-earlier quarter’s 70.5%.

During the December-end quarter, the company acquired 1,336 communication sites for a total cash consideration of $471.7 million. These included 1,313 sites purchased from Grupo Torre Sur in Brazil in December, for a total cash consideration of $460 million. The company also built 170 towers during this period. It owned or operated 32,403 communication sites as of Dec 31, 2019. Of these, 16,401 sites are located in the United States and its territories, and 16,002 internationally.

SBA Communications also spent $13.7 million to purchase land and easements, and extend lease terms. Markedly, total cash capital expenditures were $533.1 million in the reported quarter, of which $9.9 million was non-discretionary and $523.2 million represented discretionary.

Cash Flow & Liquidity

During the final quarter of 2019, SBA Communications generated $265.1 million of net cash from operations compared with the year-ago quarter’s $226.5 million. As of Dec 31, 2019, the company had $108.3 million in cash and equivalents with $9.8 billion of net long-term debt.

During the reported quarter, the company repurchased 0.9 million shares for $200.0 million, at an average price of $232.77 per share under its $1-billion stock-repurchase plan. As of the date of filing, the company had $624.3 million of authorization remaining under the plan. Further, the company paid out a cash dividend of $41.5 million in fourth-quarter 2019.

Outlook

SBA Communications expects 2020 AFFO per share in the range of $9.07-$9.47.

The company expects total revenues of $2,103-$2,143 million, of which site leasing revenues are expected in the band of $1,973-$1,993 million, and site development revenues between $130 million and $150 million. Moreover, adjusted EBITDA is projected between $1,495 million and $1,515 million.

Dividend Hike

Concurrent with its earnings release, SBA Communications announced a quarterly cash dividend of 46.5 cents on its Class A common stock, indicating a 25.7% hike from its dividend paid in the October-December quarter. The dividend will be paid on Mar 26, to shareholders of record as of the close of business on Mar 10, 2020.

How Have Estimates Been Moving Since Then?

Estimates review followed a flat path over the past two months.

VGM Scores

At this time, SBA Communications has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

SBA Communications has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.