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How the Top 3 Wireless Tower REITs Performed in 2Q17

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How the Top 3 Wireless Tower REITs Performed in 2Q17 PART 1 OF 9

How the Top 3 Wireless Tower REITs Performed in 2Q17

The sector as a whole

The wireless tower REIT sector is currently going through a very critical stage. The telecom sector is seeing large-scale consolidation amid a merger-friendly environment in the US. This factor has a huge impact on the wireless tower REIT sector because merger and consolidation activity in the industry results in higher churn rates and fewer tenants, which negatively impact tower owners’ revenues.

How the Top 3 Wireless Tower REITs Performed in 2Q17

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On the other hand, higher interest rates are raising the cost of debt for these REITs mainly because they mostly depend on debt and equity for their working capital funding.

In this context, let’s analyze the 2Q17 results of the top three wireless carrier providers: American Tower (AMT), SBAC Communications (SBAC), and Crown Castle International (CCI).

Stock price performance

The stock price movement of the REITs has shown that the Fed’s interest rate hike didn’t have much impact on the value of the stocks. American Tower’s stock rose a whopping 36.6% year-to-date in 2017. The company’s strong first half results and strategic acquisitions undertaken in the last six months have added to the optimism among investors. AMT expects the momentum to continue and raised its guidance for fiscal 2017 during the 2Q17 earnings conference call.

SBAC Communications has also witnessed a significant stock price gain of 33.5% during the first seven months of fiscal 2017. The robust top-line and bottom-line results in 1H17 and enhanced outlook for fiscal 2017 boosted the company’s stock. Moreover, the company’s generous shareholder returns have encouraged investors.

Crown Castle International has witnessed almost a 19% gain in stock price for the last seven months backed by the strategic initiatives the company has made recently. The company has bolstered its presence in small cell technology, which is necessary for 5G technology.

2Q17 performance

American Tower’s core FFO (funds from operation) of $1.58 per share met the Wall Street estimates. However, it came in higher than the year-ago mark by approximately 19%. The company reported higher year-over-year results for the 17th consecutive quarter in 2Q17. The upswing in profit was driven by higher organic tenant billing and rent growth.

SBAC Communications also reported FFO per share of $1.73, which surpassed analysts’ estimates of $1.70 per share. Results also came in higher than the year-ago mark by 14.7%.

Crown Castle’s FFO per share of $1.11, however, came in lower than analysts’ estimates by 3%. Results also were below the year-ago mark of $1.16 mainly because of higher outstanding shares. However, adjusted FFO was $440 million compared to $392 million reported a year ago.

The three REITs along with Prologis (PLD) occupy 15% of the iShares US Real Estate ETF (IYR). The ETF has 96.6% exposure to REITs and 2.5% exposure to the real estate sector.

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