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Key Factors to Impact Alexandria (ARE) This Earnings Season

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Alexandria Real Estate Equities Inc. (ARE - Free Report) is scheduled to release second-quarter 2022 results on Jul 25 after the closing bell. Its quarterly results are likely to reflect growth in funds from operations (FFO) per share.

In the last reported quarter, this Pasadena, CA-based urban office real estate investment trust (REIT), primarily focused on collaborative life science and technology campuses, delivered a surprise of 2.50% in terms of FFO per share. ARE’s performance during the quarter was mainly driven by healthy leasing activity, occupancy gains and solid rental rate growth.

Over the preceding four quarters, Alexandria’s FFO per share surpassed the Zacks Consensus Estimate on each occasion, the average beat being 1.41%. This is depicted in the graph below:

Factors at Play

Alexandria has Class A properties in AAA locations. Its high-quality lab-office assets positioned in key locations had become indispensable during the global health crisis due to the heightened need for effective diagnostics, therapies and vaccines.

The high demand for Alexandria’s highly differentiated facilities, especially the key life science segment, is anticipated to have driven decent leasing and re-leasing activity and growth in occupancy levels during the second quarter. Moreover, favorable demand-supply dynamics and the company’s strong pricing power in its core markets are likely to have played a key role in its rental growth this quarter.

Alexandria is focused on maintaining its tenant quality, and a majority of its rental revenues come from investment-grade or publicly-traded large-cap tenants. As a result, its long-term lease agreements with these tenants are expected to have generated impressive rent collections in the to-be-reported quarter.

Backed by healthy demand for its properties, ARE is expected to have continued with its development and redevelopment activities during the second quarter.

Also, Alexandria is expected to have maintained adequate financial flexibility to cushion and enhance its market position during the quarter. This is expected to have supported its development pipeline as well.

These factors are anticipated to have aided revenues and the net operating income growth of ARE during the second quarter.

The Zacks Consensus Estimate for quarterly FFO per share currently stands at $2.06, suggesting a 6.74% increase from the prior-year period’s reported figure.

However, ahead of the second-quarter earnings release, there is a lack of solid catalysts to make investors bullish on the stock. Hence, the Zacks Consensus Estimate for quarterly FFO per share has been unchanged over the past week.

What Our Quantitative Model Predicts

Alexandria does not have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

Earnings ESP: Alexandria has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: ARE currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks That Warrant a Look

Here are some stocks that are worth considering from the REIT sector as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:

SBA Communications (SBAC - Free Report) is slated to release second-quarter earnings on Aug 1. SBAC has an Earnings ESP of +1.40% and a Zacks Rank of 3 at present.

Essex Property Trust (ESS - Free Report) is scheduled to report quarterly figures on Jul 26. ESS has an Earnings ESP of +0.81% and a Zacks Rank of 2 (Buy) currently.

Equity Residential (EQR - Free Report) is slated to report quarterly numbers on Jul 26. EQR has an Earnings ESP of +1.11% and carries a Zacks Rank of 3.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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