Wells Fargo Securities reported SBA (SBAC) showed solid Q2 2016 results and increased its 2016 outlook. “We note there was some noise in the quarter driven by a decision to claim $16.5MM in bad debt expense related to Oi receivables amid its 6/20 judicial restructuring, but that aside, leasing activity in the U.S. and Brazil were both steady and in line with expectations,” said Senior Analyst Jennifer Fritzsche.
“SBAC noted there was a lot available on the M&A market, but that at current prices, it preferred to buy back its own shares, and repurchased 1MM for $100MM in the quarter. We reiterate our Market Perform rating on the stock, and believe near term the Brazil operations and foreign exchange (FX) headwinds, coupled with domestic leasing activity at lower levels, will weigh on the stock,” she said. “We are increasing our valuation range to $112-114 from $95-100 prior.”
“We had another solid quarter,” commented Jeffrey A. Stoops, President and Chief Executive Officer. “Organic leasing demand was steady, consistent with both the type and amount of demand experienced over the prior three quarters. Our customers in the U.S. were most active adding to or modifying existing macro sites to refarm 2G and 3G uses to 4G LTE or to add new spectrum to their networks,” he said.
“In our international markets, customer activity was more balanced between new macro sites and additions or modifications to existing macro sites. Our Outlook for the remainder of 2016 assumes the amount of demand remains materially the same as we have experienced during the first half of the year. We executed very well in the quarter, producing once again industry-leading operating margins. We allocated capital in the quarter very well, spread among stock repurchases, portfolio growth and ground purchases, in an aggregate amount that keeps us right at our balance sheet targets,” Stoops said.
“Finally, we completed a refinancing of a material portion of our indebtedness on very favorable terms, substantially reducing our interest costs on that portion of our capital structure. Our success in each of these areas, organic growth, operating performance, asset growth, stock repurchases and financing, has a positive impact on and contributes to our long term goal of producing AFFO of more than $10 per share in 2020.”
According to the report issued from SBA, total revenues in the second quarter of 2016 were $405.5 million compared to $410.7 million in the year earlier period, a decrease of 1.3%. Site leasing revenue of $381.8 million increased 3.1% over the year earlier period. Domestic site leasing revenue and International site leasing revenue were $316.8 million and $65.0 million, respectively, in the second quarter of 2016. Domestic cash site leasing revenue was $312.8 million in the second quarter of 2016 compared to $300.2 million in the year earlier period, an increase of 4.2%. International cash site leasing revenue was $60.3 million in the second quarter of 2016 compared to $57 million in the year earlier period, an increase of 5.7%. Eliminating the impact of changes in foreign currency exchange rates, total site leasing revenue and International cash site leasing revenue would have increased 4.8% and 16.0%, respectively, over the year earlier period. Site development revenues were $23.7 million in the second quarter of 2016 compared to $40.2 million in the year earlier period, a decrease of 41.1%.
The SBA report went on to say site leasing operating profit was $295.4 million, an increase of 2.3% over the year earlier period. Site leasing contributed 98.8% of the Company’s total operating profit in the second quarter of 2016. Domestic site leasing segment operating profit was $250.6 million, an increase of 2.8% over the year earlier period. International site leasing segment operating profit was $44.7 million, a decrease of 0.5% when compared to the year earlier period. Eliminating the impact of changes in foreign currency exchange rates, total site leasing operating profit and International site leasing segment operating profit would have increased 3.7% and 8.8%, respectively, over the year earlier period.
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