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Why Is SBA Communications (SBAC) Down 4.4% Since its Last Earnings Report?

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A month has gone by since the last earnings report for SBA Communications Corporation SBAC. Shares have lost about 4.4% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is SBAC due for a breakout? 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 Q1 Earnings Top on Higher Revenues

SBA Communications reported strong first-quarter 2018 financial results, wherein both the top line and the bottom line surpassed the Zacks Consensus Estimate.

Net Income

Net income for the first quarter was $31.5 million or 27 cents per share compared with $37.6 million or 31 cents per share in the year-ago quarter. Despite higher revenues, earnings decreased year over year due to higher operating costs and interest expense. Earnings for the reported quarter exceeded the Zacks Consensus Estimate of 21 cents.

Revenues

Total revenues increased 8.3% year over year to $458.3 million, surpassing the Zacks Consensus Estimate of $453 million. The top line was supported by positive results in both domestic and international leasing operations as well as incremental contributions from services business.

During the first quarter, the company expanded its portfolio, investing incremental capital into both new tower builds and acquisitions. It acquired 334 communication sites for $106.7 million, 300 of which were located internationally and also built 67 sites during the quarter. Subsequent to the quarter end, the company acquired 190 additional communication sites at an aggregate purchase price of $119.5 million.

The company has 874 additional sites under contract for acquisition at an aggregate price of $182.7 million, including the previously announced 811 sites located in El Salvador to be purchased from a local subsidiary of Millicom International. The company anticipates these deals will close by the end of 2018.

Segmental performance  

Quarterly revenues from site leasing increased 8.3% year over year to $430.5 million. Domestic site leasing revenues totaled $341.7 million. Domestic cash site leasing revenues were $338.7 million compared with $321.7 million in the year-ago period.

International site leasing revenues came in at $88.8 million. International cash site leasing revenues were $86.4 million compared with $71.9 million in the year-earlier period. Segment operating profit was $337.7 million, which marks an increase of 9.6% from the year-ago quarter.

SBA Communications provided the following information in light of the proposed merger between Sprint Corporation and T-Mobile US, Inc.

For the first quarter ended on Mar 31, Sprint accounted for 15.6% and T-Mobile accounted for 16.1% of SBA Communications’ total consolidated site leasing revenues. Sprint represented 5.9% of the company’s total cash site leasing revenues and T-Mobile was 6.2%.

Quarterly revenues from site development increased 7.8% year over year to $27.8 million.

Operating Metrics

Quarterly operating income improved to $130 million from $107.8 million in the year-ago quarter. Total operating expenses increased to $328.3 million from $315.5 million.

Adjusted EBITDA in the reported quarter was $318.8 million, increasing 9.1% year over year on the back of solid results from both leasing and services businesses. Adjusted EBITDA margin was 70.4% compared with 69.7% in the year-ago quarter, which was attributable to tower leasing business.

Cash Flow & Liquidity

During the reported quarter, SBA Communications generated $178.6 million of cash from operations compared with $172.3 million in the prior-year quarter.

At the end of the quarter, the company had $109.4 million of cash and cash equivalents while net long-term debt was $9,363.7 million.   

Share Repurchase

During the reported quarter, the company repurchased 0.2 million shares for $38.5 million, at an average price of $161.60 per share.

Subsequent to the first quarter, it spent an additional $261.5 million to repurchase 1.6 million shares at an average price of $164.82 per share.

Full-Year 2018 Outlook

SBA Communications provided guidance for full-year 2018. The company currently expects site leasing revenues in the range of $1,727-$1,747 million. Adjusted EBITDA is anticipated between $1,282 million and $1,302 million. AFFO per share is expected to be between $7.25 and $7.66.

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 higher for the current quarter compared to four lower. Last month, the consensus estimate has shifted downward by 12.5% due to these changes.

SBA Communications Corporation Price and Consensus

 

SBA Communications Corporation Price and Consensus | SBA Communications Corporation Quote

VGM Scores

At this time, SBAC has an average Growth Score of C, though it is lagging a bit on the momentum 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 lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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 these revisions indicates a downward shift. Notably, SBAC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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