Key Factors to Impact SBA Communications' (SBAC) Q2 Earnings
SBA Communications Corporation SBAC is scheduled to report second-quarter 2023 results on Jul 31, after market close. The company’s quarterly results are expected to reflect year-over-year growth in revenues and funds from operations (FFO) per share.
This Boca Raton, FL-based communications tower REIT delivered a surprise of 0.64% in terms of adjusted FFO (AFFO) per share in the last reported quarter. SBAC witnessed a year-over-year improvement in site-leasing revenues amid elevated tower space demand, which aided the top line. It continued to benefit from the addition of sites to its portfolio.
Over the preceding four quarters, SBAC’s AFFO per share surpassed the Zacks Consensus Estimate on three occasions and missed it once, the average beat being 1.25%. The graph below depicts this surprise history:
SBA Communications Corporation Price and EPS Surprise
SBA Communications Corporation price-eps-surprise | SBA Communications Corporation Quote
Factors at Play
During the second quarter, SBA Communications is likely to have benefited from the secular growth trends of the wireless industry. With the advancement in mobile technology, such as 4G and 5G networks, and the proliferation of bandwidth-intensive applications, mobile data usage has increased significantly globally. Also, the rampant usage of network-intensive applications for video conferencing and cloud services, and hybrid-working scenarios have fueled the rise.
This has led to greater capital spending by wireless carriers on the back of incremental demand from global 4G and 5G deployment efforts, growing wireless penetration and spectrum auctions, aiding demand for SBAC’s wireless communication infrastructure. This upbeat trend is likely to have driven healthy tower leasing activity during the quarter, boosting the company’s quarterly earnings.
Moreover, SBAC’s long-term (typically 5-10 year) tower leases with wireless service providers that have built-in rent escalators are likely to have supported stable site-leasing revenues for the company in the quarter, boosting its top line.
The Zacks Consensus Estimate for second-quarter site-leasing revenues, which account for the lion’s share of total revenues, is pegged at $628.1 million, indicating an increase of 8.3% from the year-ago quarter’s $580.2 million. Our estimate for quarterly site-leasing revenues is pegged at $618.3 million, suggesting year-over-year growth of 6.6%.
Site-development revenues are, however, expected to be on the lower side in the second quarter. The consensus mark for the same stands at $57.6 million, implying a 19.8% decline from $71.8 million reported in the year-ago period. We expect this quarter’s site-development revenues to slide 23.7% year over year to $54.7 million.
The Zacks Consensus Estimate for quarterly total revenues is pegged at $675.8 million, implying year-over-year growth of 3.7%.
SBAC’s solid balance sheet position is expected to have supported its investments in the existing 4G networks and its efforts for 5G deployment. Also, asset-base expansion through acquisitions and development activities is likely to have given it an edge.
The company’s activities during the to-be-reported quarter were adequate to garner analysts’ confidence. The Zacks Consensus Estimate for quarterly FFO per share has been revised marginally upward to $3.14 over the past week. Moreover, the figure implies year-over-year growth of 2.3%.
Nonetheless, high interest expenses and elevated churn in certain markets where the company operates might have been a deterrent for SBAC’s quarterly performance to some extent. We estimate the company’s interest expense to have risen 15% year over year.
Earning Whispers
Our proven model does not conclusively predict a surprise in terms of FFO per share for SBA Communications this season. The combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that’s not the case here.
Earnings ESP: SBAC has an Earnings ESP of -0.32 %. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: SBA Communications currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks That Warrant a Look
Here are some stocks that are worth considering from the REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:
American Tower AMT is slated to report quarterly numbers on Jul 27. AMT has an Earnings ESP of +2.82% and carries a Zacks Rank #3 presently.
W.P. Carey WPC is slated to report quarterly numbers on Jul 28. WPC has an Earnings ESP of +1.13% and carries a Zacks Rank #2 (Buy) presently.
Ventas VTR is scheduled to report quarterly numbers on Aug 3. VTR has an Earnings ESP of +1.75% and a Zacks Rank #2 currently.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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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American Tower Corporation (AMT) : Free Stock Analysis Report
Ventas, Inc. (VTR) : Free Stock Analysis Report
SBA Communications Corporation (SBAC) : Free Stock Analysis Report
W.P. Carey Inc. (WPC) : Free Stock Analysis Report
