SBA Impresses the Market Analysts

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According to Spencer Kurn with New Street Research, SBAC reported a strong set of results, with better than expected domestic growth driving a beat this quarter and a raise to full year guidance.

“Management’s outlook now implies a faster acceleration in organic growth between now and year end than we expected,” Kurn said. “If bookings hold at current levels, this should result in faster growth in 2020 as well. 

Further, we think even mgmt.’s enhanced outlook is still conservative. We are raising estimates and taking our target to $210. Our target includes 50/50 odds of the T-Mobile / Sprint deal going through.”  

Kurn said if the deal is blocked, he would value SBAC at $220. SBAC remains his “preferred way to own the towers.”

Jennifer Fritzsche, Senior Analyst at Wells Fargo Securities, said SBAC reported solid Q1 2019 results that saw financials come in better than their estimates and Street estimates.   

“Continued strong domestic leasing demand from all Big 4 wireless carriers drove the leasing results,” Fritzsche said, “with DISH and Sprint specifically highlighted as being active in the quarter. Services revenue was higher than we were expecting (most driven by S).”

Fritzsche said it was interesting that SBAC did not repurchase any shares in Q1. “Leverage as of Q1 was 7.0x – the low end of its 7.0-7.5x range,” she said. “While it was strange to not have any repurchases in the quarter, we believe it was more of a function of timing, and expect share repurchases to continue to be core to the SBAC story to complement portfolio growth.”

Nick Del Deo of MoffettNathanson said SBA has created meaningful value for its shareholders over time via its share repurchase program.  

“Between 2015 and 2018, SBA repurchased 20.2M shares for $2,646M, or an average price of $131 per share (the company did not repurchase shares from Q4 2011 to Q1 2015),” Del Deo said.  “That helped take shares outstanding from 129.4M to 112.4M over the same timeframe (SBA issued 3.2M shares for management compensation and acquisitions). However, the appeal of repurchases becomes a bit iffier with the stock now at ~$200. In fact, management did not buy back any shares this quarter, and leverage declined to the lower end of its 7.0x to 7.5x target range,” he said.

May 1, 2019

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