Key Factors to Impact SBA Communications' (SBAC) Q3 Earnings
SBA Communications Corporation SBAC is scheduled to report third-quarter 2023 results on Nov 2 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 3.18% in terms of adjusted FFO (AFFO) per share in the last reported quarter. SBAC’s site-leasing revenues improved year over year on healthy leasing activity amid elevated tower space demand. Moreover, it has 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 once, the average beat being 1.29%. 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
SBA Communications is likely to have benefited from the secular growth trends of the wireless industry in the third quarter. 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. Furthermore, the extensive use of network-intensive applications for activities like video conferencing and cloud services, coupled with the prevalence of hybrid work arrangements, has further contributed to this upward trend.
Consequently, wireless carriers have increased their capital investments due to the growing demand resulting from global initiatives to roll out 4G and 5G networks, the expanding reach of wireless services and spectrum auctions. This heightened investment has supported the demand for SBA Communications' wireless communication infrastructure. This positive trend is likely to have stimulated robust tower leasing activities in the quarter, thereby enhancing the company's earnings for the period.
Moreover, SBAC’s long-term (typically five to 10 years) 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 third-quarter site-leasing revenues, which account for the lion’s share of total revenues, is pegged at $628.54 million, indicating an increase of 7% from the year-ago quarter’s $587.30 million. Our estimate for quarterly site-leasing revenues is pegged at $624.6 million, suggesting year-over-year growth of 6.3%.
However, site-development revenues are expected to be on the lower side in the third quarter. The consensus mark stands at $50.10 million, implying a 43.3% decline from $88.3 million reported in the year-ago period. We expect this quarter’s site-development revenues to slide 42.4% year over year to $50.9 million.
The Zacks Consensus Estimate for total quarterly revenues is pegged at $678.01 million, implying year-over-year growth of 0.36%.
SBAC’s solid balance sheet position is expected to have supported its investments in the existing 4G networks and 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 $3.23 over the past two months. Moreover, the figure implies year-over-year growth of 4.19%.
However, 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 12.2% year over year.
Here Is What Our Quantitative Model Predicts:
Our proven model predicts a surprise 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 chances of an FFO beat, which is the case here.
SBA Communications currently has a Zacks Rank of 3 and an Earnings ESP of +0.27%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Another Stock That Warrants a Look
Our model shows that Easterly Government Properties, Inc. DEA also has the right combination of elements to report a surprise this quarter.
Easterly Government Properties is slated to report quarterly numbers on Oct 31. DEA has an Earnings ESP of +1.16% and carries a Zacks Rank of 3 presently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Performance of Other REITs
Crown Castle Inc. CCI reported a third-quarter 2023 AFFO per share of $1.77, lagging the Zacks Consensus Estimate by a whisker. The reported figure declined 4.3% from the year-ago quarter. Results reflected lower-than-anticipated revenues. Higher interest expenses and lower contributions from adjusted EBITDA were undermining factors. While CCI maintained its outlook for 2023, it issued the 2024 AFFO per share guidance below the consensus mark.
American Tower Corporation's AMT third-quarter 2023 AFFO per share, attributable to AMT common stockholders, of $2.58 beat the Zacks Consensus Estimate of $2.35 and climbed 9.3% year over year. Results reflected better-than-anticipated revenues, aided by revenue growth across its Property segment. American Tower recorded healthy year-over-year organic tenant billings growth of 6.3% and total tenant billings growth of 7.3%. It also raised its outlook for 2023.
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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