STAG Industrial, Inc. (STAG Quick QuoteSTAG - Free Report) is slated to report fourth-quarter and full-year 2022 earnings on Feb 15 after market close. The company’s quarterly results are likely to reflect growth in revenues and core funds from operations (FFO) per share.

In the last reported quarter, this industrial real estate investment trust (REIT) delivered a surprise of 5.56% in terms of core FFO per share. Results reflected better-than-expected revenues.

Over the trailing four quarters, STAG Industrial beat estimates on three occasions and missed the same on the other, the average beat being 2.81%. This is depicted in the graph below:

Stag Industrial, Inc. Price and EPS Surprise

Stag Industrial, Inc. price-eps-surprise | Stag Industrial, Inc. Quote

Let’s see how things have shaped up before this announcement.

Factors at Play

Despite the recent slowdown in demand, 2022 appeared a solid year for the U.S. industrial market, per the Cushman & Wakefield (CWK Quick QuoteCWK - Free Report) report.

There was a net absorption of 107.3 million square feet (msf) of space in the December-end quarter, down 9.4% from the third quarter. This stemmed from slowing demand amid economic headwinds and historically tight market conditions. However, it marked the ninth straight quarter where absorption surpassed the 100 msf mark.

Moreover, for the third year in succession, the U.S. industrial market inked more than 700 msf of new leasing volume, with 757 msf signed throughout 2022. Although the U.S. industrial vacancy rate moved up 20 basis points (bps) from the prior quarter to 3.3%, vacancy is still 140 bps lower than what it was pre-pandemic and remains more than 300 bps lower than its 10-year average of 6.5%.

Though asking rents increased in 2022, these exhibited signs of moderation in recent quarters. While the average industrial asking rental rate climbed just 1.0% sequentially to $8.81 per square foot, it surged 18.6% year over year. This marked the strongest year in
history for annual rental rate growth, per the CWK report.

STAG Industrial, which focuses on the acquisition, ownership and operation of industrial properties throughout the United States, is also anticipated to have witnessed healthy demand for the fast adoption of e-commerce, with leasing activity getting support in the to-be-reported quarter.

Moreover, with supply chains transforming for faster fulfillment and resilience, STAG is likely to have captured favorable fundamentals. Supply-chain reconfiguration and increases in inventory levels are expected to have acted as tailwinds in the fourth quarter. These are likely to have supported STAG’s occupancy and rental rates.

The Zacks Consensus Estimate for fourth-quarter revenues is currently pegged at $165.2 million. This suggests an 11.91% year-over-year jump.

Before the fourth-quarter earnings release, the company’s activities were adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly core FFO per share has moved a cent upward to 56 cents in the past week. This suggests year-over-year growth of 9.8%.

However, with the asset category being attractive, there is a development boom in many markets. Per the CWK report, in the fourth quarter, new deliveries remained elevated, with 143.6 msf of industrial product completing construction. Consequently, supply outpaced the demand for the second straight quarter and on an annual basis. The high supply is likely to have intensified competition during the December-end quarter.
 
For the full-year 2022, STAG expected core FFO per share in the range of $2.19-$2.21. The company expected same-store cash net operating income growth of 5.00-5.25%, while the retention level is projected at 65-75%. General and administrative expenses are projected in the range of $47 million-$48 million. The company expected the acquisition volume in the range of $460 million-$525 million, while the disposition volume is projected at $135 million and $150 million.

For the full year, the Zacks Consensus Estimate for core FFO per share is pegged at $2.21. The figure indicates a 7.28% increase year over year on 16.02% year-over-year growth in revenues to $652.2 million.

Here Is What Our Quantitative Model Predicts:

Our proven model does not conclusively predict a surprise in terms of FFO per share for STAG Industrial this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.

STAG Industrial currently carries a Zacks Rank of 2 and 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.

Stocks That Warrant a Look

Here are some stocks from the REIT sector — Digital Realty Trust, Inc. (DLR Quick QuoteDLR - Free Report) , VICI Properties Inc. (VICI Quick QuoteVICI - Free Report) and Gladstone Commercial Corporation (GOOD Quick QuoteGOOD - Free Report) — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.

Digital Realty Trust, scheduled to report fourth-quarter earnings on Feb 16, currently has an Earnings ESP of +0.99 % and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

VICI Properties, slated to release quarterly numbers on Feb 23, has an Earnings ESP of +0.29% and carries a Zacks Rank of 2 at present.

Gladstone Commercial Corporation, scheduled to report quarterly numbers on Feb 22, currently has an Earnings ESP of +5.13% 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 represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.