Why Is SBA Communications (SBAC) Up 7.1% Since Last Earnings Report?
A month has gone by since the last earnings report for SBA Communications (SBAC). Shares have added about 7.1% 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 the most recent earnings report in order to get a better handle on the important drivers.
SBA Communications' Q4 AFFO Beat, Revenues Fall Y/Y
SBA Communications reported fourth-quarter 2023 AFFO per share of $3.37, beating the Zacks Consensus Estimate of $3.32. The figure also reflects a rise of 8% from the prior-year quarter.
The company witnessed an improvement in site-leasing revenues during the quarter. It continues to benefit from the addition of sites to its portfolio. However, site development posted lower revenues, which affected the top line to some extent. It also announced an increase in dividends and issued its 2024 outlook.
Quarterly total revenues decreased 1.6% year over year to $675 million. The figure also missed the Zacks Consensus Estimate of $683.8 million.
Brendan Cavanagh, the president and CEO of the company, said, “We had a strong finish to 2023, exceeding our outlook for Site Leasing Revenue, Tower Cash Flow, Adjusted EBITDA and AFFO. While domestic carrier activity was at a low level by historical standards during 2023, a significant percentage of our sites still require 5G-related upgrades, and with the growing success of products such as Fixed Wireless Access, the demand for improved speeds, lower latency and greater network capacity continues to advance. This dynamic bodes well for solid organic leasing growth on our U.S. assets for years to come.”
Quarter in Detail
Site-leasing revenues increased 4.3% year over year to $636.1 million. Quarterly Site-leasing revenues consisted of domestic site-leasing revenues of $466.6 million and international site-leasing revenues of $169.5 million. The domestic cash site-leasing revenues came in at $460.9 million, growing 4% year over year. International cash site leasing revenues came in at $171.4 million, jumping 8.8% year over year.
However, site development revenues decreased 49.1% year over year to $38.9 million.
The site-leasing operating profit was $516.8 million, marking an increase of 4.5% year over year. Moreover, 97.4% of SBA Communications’ total operating profit in the quarter came from site leasing.
The overall operating income fell 10.6% to $209.7 million.
The adjusted EBITDA totaled $480.7 million, up 4.3%, while the adjusted EBITDA margin increased to 71.6% from 68.1% in the prior-year quarter.
Portfolio Activity
In the fourth quarter, SBA Communications acquired 23 communication sites for a total cash consideration of $21.3 million. The company also built 138 towers during this period. It owned or operated 39,618 communication sites as of Dec 31, 2023, of which 17,487 were in the United States and its territories and 22,131 internationally.
SBA Communications also spent $17.4 million to purchase land and easements and extend lease terms. Total cash capital expenditure was $99.8 million in the reported quarter, of which $84.9 million represented discretionary and $14.7 million was non-discretionary.
Subsequent to the quarter end, it purchased or is under contract to buy 281 communication sites for a total consideration of $87.8 million in cash. It expects to complete the acquisition by the end of the third quarter of 2024.
Cash Flow & Liquidity
In the fourth quarter, SBA Communications generated nearly $432.6 million of net cash from operating activities compared with the year-ago quarter’s $288.6 million.
As of Dec 31, 2023, it had $247.7 million in cash and cash equivalents, short-term restricted cash and short-term investments, up from $228.9 million recorded as of Sep 30, 2023. SBA Communications ended the quarter with a net debt-to-annualized adjusted EBITDA of 6.3X.
As of Feb 26, 2023, the company had $70 million outstanding under the $2 billion revolving credit facility.
In October 2023, SBA Communications repurchased 0.1 million shares of its Class A common stock for $12.7 million. After this, no additional repurchases were made during the fourth quarter. As of Dec 31, 2023, it had $404.7 million of authorization remaining under its $1 billion stock repurchase plan.
2024 Guidance
SBA Communications expects AFFO per share in the range of $13.15-$13.51. Further, the adjusted EBITDA is estimated to be in the band of $1,894-$1,914 million. Site-leasing revenues are projected to be $2,529-$2,549 million. Site-development revenues are expected to be between $140 million and $160 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, SBA Communications has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, SBA Communications has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
SBA Communications belongs to the Zacks REIT and Equity Trust - Other industry. Another stock from the same industry, Lamar Advertising (LAMR), has gained 6.2% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Lamar reported revenues of $555.91 million in the last reported quarter, representing a year-over-year change of +3.8%. EPS of $1.46 for the same period compares with $1.91 a year ago.
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