SBA CommunicationsSBAC

The company reported earnings of $1.87 per share, slightly ahead of the $1.85 analysts expected. Revenue reached $720 million, also beating estimates. Management noted that the business is performing as expected and declared a quarterly dividend of $1.25 per share.

Beyond the numbers, the company reached a milestone by earning a BBB credit rating from S&P. This means the firm is now considered investment-grade, which should help it borrow money at lower interest rates. It followed this up by issuing $3.5 billion in new debt and expanding its credit line to $2.5 billion, giving it more flexibility to manage its 46,000 tower sites.

See the full quarter, and how our tracked metrics did

Source: 8-K filing

Key highlights

• Profit outlook raised: Management increased its full year forecast for adjusted funds from operations, a measure of cash profit for real estate companies, to a range of $11.95 to $12.40 per share. This small raise from the previous midpoint of $12.16 follows steady demand from wireless carriers who are upgrading their existing cell sites.
• International growth accelerating: International leasing revenue grew 30.5% to $211.4 million, making up nearly a third of all leasing income. The company is leaning into expansion in Central America, where it built 99 of its 109 new towers this quarter to serve growing wireless markets.
• Credit rating upgraded: S&P upgraded the company to an investment grade rating of BBB, which helps lower the cost of borrowing money. Following this change, the company issued $3.5 billion in new unsecured notes and set up a larger $2.5 billion credit facility to provide more flexibility for buying back stock or building towers.
• Leasing margins tighten: The tower cash flow margin, which measures the profit left from rent after paying to run the sites, fell to 79.5% compared to 81.0% a year ago. This dip happened because costs to operate the sites rose faster than the rent collected during the period.
• Domestic revenue decline: Revenue from leasing towers in the United States fell 3.7% to $452.5 million. This drop was driven by the loss of tenants as cellular carriers like Sprint and EchoStar consolidated their networks and shut down redundant equipment.

Our take: A steady quarter that shows the business is moving past a difficult period of carrier mergers. While domestic revenue is still shrinking due to network shutdowns, the upgrade to an investment grade credit rating is the real win here. It secures cheaper funding to fuel the fast growing international portfolio.