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SBA Communications (SBAC) Up 4.2% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for SBA Communications Corporation SBAC. Shares have added about 4.2% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is SBAC due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

SBA Communications Tops on Q4 Earnings, Issues View

SBA Communications reported strong financial results for the fourth quarter of 2017, wherein the top and the bottom lines outpaced the Zacks Consensus Estimate.

Net Income

Net income for the fourth quarter of 2017 was $7.7 million or 6 cents per share compared with $5.3 million or 4 cents per share in the year-ago quarter. After adjusting for non-recurring gains, earnings per share in the reported quarter were 23 cents, well above the Zacks Consensus Estimate of 18 cents.

Revenues

Total revenues of approximately $443.1 million increased 6.4% year over year, outpacing the Zacks Consensus Estimate of $437.5 million.

As of Dec 31, 2017, SBA Communications owned total sites of 27,909. Of the total, 15,979 were domestic and 11,930 were international sites.

Site Leasing Segment

Quarterly revenues came in at $414.1 million compared with $393.6 million in the year-ago quarter. Domestic Site Leasing revenues totaled $333.5 million, increasing 3.4% year over year. International Site Leasing revenues came in at $80.5 million, reflecting an increase of 13.6% year over year. Segment operating profit was $323.63 million, which marks an increase of 5.4% from the year-ago quarter.

Site Development Segment

Quarterly revenues totaled $28.9 million compared with $22.8 million in the year-ago quarter. Operating profit was $4.9 million, up 51.9% year over year. Operating profit margin improved to 17% from 14.1% in the year-ago quarter.

Operating Metrics

Quarterly operating income improved to $119.1 million in fourth-quarter 2017 from $107.4 million in fourth-quarter 2016. Total operating expenses increased to $323.9 million from $309.1 million in the year-ago quarter. Adjusted EBITDA in the reported quarter was $310.1 million, increasing 8% year over year. Adjusted EBITDA margin was 70.6% compared with 70.0% in the year-ago quarter.

Cash Flow & Liquidity

In the fourth quarter of 2017, SBA Communications generated $228.1 million of cash from operations compared with $215.3 million in the prior-year period.

At the end of the reported quarter, the company had $68.8 million in cash and cash equivalents and around $9,640.4 million of outstanding long-term debt compared with $146.1 million and $8,483.42 million, respectively, at the end of 2016.

Share Repurchase

During the fourth quarter of 2017, the company repurchased 1.9 million shares of its Class A common stock for $311.1 million, at an average price per share of $160.15.

Full-Year 2018 Outlook

SBA Communications has provided its full-year guidance for 2018. The company expects Site leasing revenues in the range of $1,730-$1,750 million. Site development revenues are projected in the $100-$120 million band. Total revenues are expected between $1,830 million and $1,870 million. Adjusted EBITDA is anticipated between $1,279 million and $1,299 million. Net interest expense is estimated in the range of $346-$356 million. AFFO (adjusted fund flow from operations) is projected in the range of $861-$908 million. AFFO per share is expected between $7.27 million and $7.67 million. Discretionary cash capital expenditures are anticipated between $530 million and $555 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

SBA Communications Corporation Price and Consensus

 

SBA Communications Corporation Price and Consensus | SBA Communications Corporation Quote

VGM Scores

At this time, SBAC has a great Growth Score of A, though it is lagging a lot on the momentum front with an F. The stock was also allocated a grade of F on the value side, putting it in the lowest 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.

The company's stock is suitable solely for growth based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. It's no surprise SBAC has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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