SBA Communications Lifts 2020 Profit Outlook; Analyst Cuts PT

SBA Communications posted better-than-expected 3Q results. Revenues of the real estate investment trust, which owns and operates wireless communications infrastructure increased 3% year-on-year to $522.9 million and surpassed analysts’ expectations of $516 million.

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SBA Communications’ (SBAC) adjusted fund from operations (AFFO), a key measure of profitability, increased 10.7% to $2.38 per share and exceeded analysts’ forecasts of $2.32.

The company’s CEO Jeff Stoops said, “US wireless customer activity picked up in the third quarter relative to the first half of 2020, although still slightly behind year-ago levels. This was evident from our services results and new domestic lease activity, as all three US nationwide wireless carriers were and are active. Internationally, leasing activity was slightly above the first half of the year as well.” (See SBAC stock analysis on TipRanks).

Buoyed by stronger-than-expected quarterly performance, SBA raised its full-year earnings outlook. The company now projects adjusted EPS between $9.27 and $9.50, up from the earlier guidance range of $8.94-$9.33. It expects revenues to be in the range of $2.065-$2.085 billion, compared with the previous forecast of $2.047-$2.087 billion.

Following the earnings release, Raymond James analyst Ric Prentiss reiterated a Buy rating on the stock. However, Prentiss lowered the price target to $327 (12.4% upside potential) from $366 saying that “we think our thesis of a long runway of leasing in a low-interest-rate environment remains intact, but the timing of the U.S. leasing rebound is still uncertain.”

Currently, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 4 Buys and only 1 Hold. The average price target of $330.80 implies upside potential of about 13.7% to current levels. Shares are up 20.7% year-to-date.