A strange thing happened on Wall Street after American Tower and SBA Communications posted positive second quarter results. Their stocks went down.
Jennifer Fritzsche, senior analyst, Wells Fargo, writes that Crown Castle’s less-than-anticipated 2Q growth had stirred up a lot of questions from investors.
“We have gotten a lot of ‘the tower group is dead’ comments,” Fritzsche wrote. “We do not agree. In fact, we would say that the pipeline of business for these companies is as strong as it has been in the last 14 years of following these stocks. (We remember in 1999 when AMT’s stock price was under $1!)”
Indeed, in the second quarter, SBA saw total revenues of $324.3 million, an increase of 41.6 percent; site leasing revenue of $279.5 million, up 37 percent; tower cash flow of $238 million, up 34 percent; and adjusted EBITDA of $196.4 million, up 38 percent.
Jeffrey Stoops, SBA president and CEO, expects portfolio growth to accelerate in the second half of 2013 with the previously announced tower purchases.
“We expect the combination of strong continued customer activity and material portfolio growth will allow us to finish 2013 with, and position 2014 for, material growth in site leasing revenue, adjusted EBITDA, AFFO and AFFO per share,” he said.
American Tower’s total revenue increased 15.9 percent to $808.8 million, domestic rental and management segment revenue increased 10.1 percent to $521.0 million, adjusted EBITDA increased 12.5 percent to $524.0 million, core growth in adjusted EBITDA was 14.7 percent, and adjusted EBITDA margin was 65 percent.
Jim Taiclet, American Tower’s CEO, said demand for tower space led to robust leasing activity across the company’s global portfolio.
“We expect the favorable leasing trends we have seen so far this year to continue generating solid core performance, offsetting potential headwinds from the translation of foreign currency exchange rates,” Taiclet said.
As a result of the strong second quarter results SBA increased its 2013 outlook in several metrics, according to Stoops.
“Current activity levels with the big four U.S. carriers remain high, and our backlogs remain solid. Because of our second quarter success, we are increasing our full year 2013 outlook for site leasing revenue, notwithstanding that we have begun to experience a loss of iDEN revenue,” he said.
Even with headwinds caused by a strengthening U.S. dollar, American Tower reiterated the midpoint of its 2013 outlook for total rental and management segment revenue and raised the midpoint of its outlook for adjusted EBITDA and AFFO, said Tom Bartlett, American CFO.
“This is an indication of the strength we see in our underlying organic business and our confidence in the secular demand trends we are seeing throughout our global footprint,” he said.