It has been about a month since the last earnings report for SBA Communications (SBAC). Shares have added about 2.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is SBA Communications 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 Beats on Q3 Earnings & Revenues
SBA Communications reported healthy third-quarter 2018 results, wherein both the top line and the bottom line surpassed the respective Zacks Consensus Estimate.
On a GAAP basis, net income for the reported quarter was $16.1 million or 14 cents per share compared with $49.2 million or 41 cents per share in the year-ago quarter. Despite higher revenues, earnings decreased year over year due to higher operating costs, interest expenses and unfavorable foreign currency movements.
Adjusted funds from operations (AFFO) were $222.7 million or $1.92 per share compared with $211.3 million or $1.75 per share in the prior-year quarter. The figure beat the Zacks Consensus Estimate by 5 cents.
Quarterly total revenues increased 7.7% year over year to $467.2 million, surpassing the Zacks Consensus Estimate of $460 million. The top-line growth was supported by positive results in both domestic and international site leasing operations.
During the third quarter, the company expanded its portfolio, investing incremental capital in both new tower builds and acquisitions. It purchased 679 communication sites for $106.9 million and also built 90 towers during the quarter. Subsequent to the quarter end, SBA Communications acquired 46 communication sites at an aggregate price of $17.1 million in cash. The company has agreed to purchase 410 additional sites in the United States and internationally for an aggregate price of $97.9 million, and expects to close a majority of them by the end of first-quarter 2019.
Revenues from site leasing increased 6.6% year over year to $435.3 million. Domestic site leasing revenues totaled $353.5 million. Domestic cash site leasing revenues were $350.4 million compared with $327.9 million in the year-ago period. International site leasing revenues came in at $81.8 million. International cash site leasing revenues were $79.8 million compared with $76.3 million a year ago. The segment’s operating profit was $343 million, which marks an increase of 7.8%.
Revenues from site development improved 26% year over year to $32 million.
Other Financial Metrics
Operating income improved to $138 million from $117 million in the year-ago quarter. Total operating expenses increased to $329.2 million from $316.9 million.
Adjusted EBITDA in the reported quarter was $328.1 million, increasing 8.2% year over year on the back of solid results from both leasing and services businesses. Adjusted EBITDA margin was 71% compared with 70.6% in the year-ago quarter.
Cash Flow and Liquidity
During the third quarter, SBA Communications generated $199.1 million of cash from operations compared with $187.3 million in the prior-year quarter. As of Sep 30, 2018, the company had $136.2 million of cash and cash equivalents while net long-term debt was $9,710.1 million. In addition, SBA Communications had $215 million available under the $1.25 billion revolving credit facility.
During the third quarter, the company repurchased 0.7 million shares for $108 million at an average price of $155.16 per share. At the quarter end, the company had $404.5 million worth of shares available under its $1 billion stock repurchase plan.
SBA Communications updated its earlier guidance for full-year 2018 to better reflect its current business operations and foreign currency impact. The company currently expects site leasing revenues in the range of $1,730-$1,740 million, up from $1,719-$1,739 million expected earlier. Adjusted EBITDA is anticipated between $1,294 million and $1,304 million compared with previous expectation of $1,278-$1,298 million. AFFO per share is expected to be between $7.42 and $7.64, up from $7.21 and $7.62.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
Currently, SBA Communications has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, SBA Communications has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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