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REITs to Watch for Earnings Early Next Week: AVB, AGNC & More
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The Q3 earnings season for real estate investment trust (REIT) stocks has already commenced and Monday will mark the beginning of one of the busiest weeks of the season.
Student REIT, American Campus Communities, Inc. , residential REIT, Avalonbay Communities, Inc. (AVB - Free Report) , retail REITs, Agree Realty Corp. (ADC - Free Report) and Brixmor Property Group, Inc. (BRX - Free Report) as well as mortgage REIT, AGNC Investment Corp. (AGNC - Free Report) are slated to report their earnings on Oct 24, 2016.
Of late, rate hike issues have been flaring up volatility in returns of the REIT stocks. However, the industry has managed to record decent performances in the first two quarters of 2016. Moreover, the Fed’s decision to keep the rate hike on hold during the third quarter is expected to have benefited the debt-dependent REITs. Nonetheless, individual market dynamics of the underlying asset category play a pivotal role in defining the REITs’ performance since the companies cater to an entirely different class of asset.
Hence, it is imperative to examine the fundamentals of the asset categories to predict the REITs’ performances in the to-be-reported quarter.
Industry Fundamentals
According to an Axiometrics study, the national apartment market has been experiencing moderation over the past few quarters, after posting robust results in 2014 and 2015, thanks to the new supply in the high-rent metros. However, the market is still performing above the long-term average. Also, market fundamentals are still steady in the mid-range markets.
Moreover, per another recent Axiometrics study, the student housing market has recorded solid rent growth in the fall 2016 leasing session. However, rising supply has been softening a number of select markets and leading to a slowdown in leasing velocity.
On the other side, retail availability rate has tightened in many of the U.S. markets in the third quarter, according to a CBRE Group Inc. (CBG) study. Amid limited supply, demand for retail spaces have continued to rise, with retailers combining online and bricks-and-mortar operations and retail landlords transforming their boring shopping hubs into entertainment zones.
This is because even though online retailing has gathered momentum, customers still prefer spending time in retail centers for shopping, together with dining and entertaining activities. Also, mortgage REITs’ concerted measures to reposition portfolio for hedging interest rate uncertainty is likely to support their bottom line.
Performance Expectations
Therefore, surprises might be in store for REITs, this earnings season, despite challenging environments stemming from the rising supply in some asset categories. Let’s take a look at the five REITs scheduled to release their third-quarter results on Oct 24.
Residential REIT – Avalonbay – is slated to release its earnings report after the closing bell on Monday. Amid favorable demographics and healthy demand along its markets, AvalonBay is well poised to grow, given its solid portfolio of high quality assets in premium locations. The company also has a robust balance sheet. However, completion of a number of projects in its markets, leading to higher supply, is likely to result in moderation of rent growth. (Read more: AvalonBay Likely to Beat Q3 Earnings: Stock to Gain?)
The Zacks #3 Rank (Hold) stock currently has an Earnings ESP – the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate – of 0.00%. Though a beat was predicted earlier, presently our model does not conclusively forecast that the company will record a positive surprise. This is because it lacks the right combination of the two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Notably, this stock surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed on the other two occasions, as shown in the chart below:
American Campus Communities, which deals in the acquisition, design, finance, development, construction management, leasing and management of student-housing properties, has an Earnings ESP of 0.00% and a Zacks Rank #3. This stock also lacks the right combination required for an earnings beat prediction.
This stock posted a positive average beat of 0.47% over the trailing four quarters, having beaten the Zacks Consensus Estimate in one and meeting estimates in the other three quarters, as demonstrated in the chart below:
Agree Realty – a retail REIT focused on the development and acquisition of net lease retail properties throughout the U.S. – has an Earnings ESP of negative 1.56% and a Zacks Rank #3. Despite a favorable Zacks Rank, the negative ESP reduces the chance on any positive surprise this quarter.
The stock met estimates in three out of the trailing four quarters and missed in the other, as depicted in the graph below. Its average surprise over the four quarters is negative 0.41%.
Brixmor Property – which owns and operates a portfolio of high-quality, open-air shopping centers in the U.S. – has an Earnings ESP of 0.00% and a Zacks Rank #3. Our proven model does not conclusively show that Brixmor Property is likely to post a positive surprise in the quarter as it does not have the right combination of rank and ESP.
This stock posted a positive average beat of 1.48% for the trailing four quarters, having surpassed the Zacks Consensus Estimate in two and meeting estimates in the other two, as reflected in the chart below:
However, mREIT AGNC Investment Corp., which changed its name from "American Capital Agency Corp." effective Sep 30, 2016, following the closure of AGNC's internalization on Jul 1, 2016, is likely to report an earnings surprise this quarter.
The stock has an Earnings ESP of 1.82%. This is a meaningful and leading indicator of a likely positive surprise. When positive ESP is combined with the company’s favorable Zacks Rank #3, it raises the prospect of a positive surprise this season.
However, over the trailing four quarters, the stock exceeded estimates once, and missed in the other three quarters, with an average negative surprise of 4.81%.
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
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REITs to Watch for Earnings Early Next Week: AVB, AGNC & More
The Q3 earnings season for real estate investment trust (REIT) stocks has already commenced and Monday will mark the beginning of one of the busiest weeks of the season.
Student REIT, American Campus Communities, Inc. , residential REIT, Avalonbay Communities, Inc. (AVB - Free Report) , retail REITs, Agree Realty Corp. (ADC - Free Report) and Brixmor Property Group, Inc. (BRX - Free Report) as well as mortgage REIT, AGNC Investment Corp. (AGNC - Free Report) are slated to report their earnings on Oct 24, 2016.
Of late, rate hike issues have been flaring up volatility in returns of the REIT stocks. However, the industry has managed to record decent performances in the first two quarters of 2016. Moreover, the Fed’s decision to keep the rate hike on hold during the third quarter is expected to have benefited the debt-dependent REITs. Nonetheless, individual market dynamics of the underlying asset category play a pivotal role in defining the REITs’ performance since the companies cater to an entirely different class of asset.
Hence, it is imperative to examine the fundamentals of the asset categories to predict the REITs’ performances in the to-be-reported quarter.
Industry Fundamentals
According to an Axiometrics study, the national apartment market has been experiencing moderation over the past few quarters, after posting robust results in 2014 and 2015, thanks to the new supply in the high-rent metros. However, the market is still performing above the long-term average. Also, market fundamentals are still steady in the mid-range markets.
Moreover, per another recent Axiometrics study, the student housing market has recorded solid rent growth in the fall 2016 leasing session. However, rising supply has been softening a number of select markets and leading to a slowdown in leasing velocity.
On the other side, retail availability rate has tightened in many of the U.S. markets in the third quarter, according to a CBRE Group Inc. (CBG) study. Amid limited supply, demand for retail spaces have continued to rise, with retailers combining online and bricks-and-mortar operations and retail landlords transforming their boring shopping hubs into entertainment zones.
This is because even though online retailing has gathered momentum, customers still prefer spending time in retail centers for shopping, together with dining and entertaining activities. Also, mortgage REITs’ concerted measures to reposition portfolio for hedging interest rate uncertainty is likely to support their bottom line.
Performance Expectations
Therefore, surprises might be in store for REITs, this earnings season, despite challenging environments stemming from the rising supply in some asset categories. Let’s take a look at the five REITs scheduled to release their third-quarter results on Oct 24.
Residential REIT – Avalonbay – is slated to release its earnings report after the closing bell on Monday. Amid favorable demographics and healthy demand along its markets, AvalonBay is well poised to grow, given its solid portfolio of high quality assets in premium locations. The company also has a robust balance sheet. However, completion of a number of projects in its markets, leading to higher supply, is likely to result in moderation of rent growth. (Read more: AvalonBay Likely to Beat Q3 Earnings: Stock to Gain?)
The Zacks #3 Rank (Hold) stock currently has an Earnings ESP – the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate – of 0.00%. Though a beat was predicted earlier, presently our model does not conclusively forecast that the company will record a positive surprise. This is because it lacks the right combination of the two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Notably, this stock surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed on the other two occasions, as shown in the chart below:
AVALONBAY CMMTY Price and EPS Surprise
AVALONBAY CMMTY Price and EPS Surprise | AVALONBAY CMMTY Quote
American Campus Communities, which deals in the acquisition, design, finance, development, construction management, leasing and management of student-housing properties, has an Earnings ESP of 0.00% and a Zacks Rank #3. This stock also lacks the right combination required for an earnings beat prediction.
This stock posted a positive average beat of 0.47% over the trailing four quarters, having beaten the Zacks Consensus Estimate in one and meeting estimates in the other three quarters, as demonstrated in the chart below:
AMER CAMPUS CTY Price and EPS Surprise
AMER CAMPUS CTY Price and EPS Surprise | AMER CAMPUS CTY Quote
Agree Realty – a retail REIT focused on the development and acquisition of net lease retail properties throughout the U.S. – has an Earnings ESP of negative 1.56% and a Zacks Rank #3. Despite a favorable Zacks Rank, the negative ESP reduces the chance on any positive surprise this quarter.
The stock met estimates in three out of the trailing four quarters and missed in the other, as depicted in the graph below. Its average surprise over the four quarters is negative 0.41%.
AGREE RLTY CORP Price and EPS Surprise
AGREE RLTY CORP Price and EPS Surprise | AGREE RLTY CORP Quote
Brixmor Property – which owns and operates a portfolio of high-quality, open-air shopping centers in the U.S. – has an Earnings ESP of 0.00% and a Zacks Rank #3. Our proven model does not conclusively show that Brixmor Property is likely to post a positive surprise in the quarter as it does not have the right combination of rank and ESP.
This stock posted a positive average beat of 1.48% for the trailing four quarters, having surpassed the Zacks Consensus Estimate in two and meeting estimates in the other two, as reflected in the chart below:
BRIXMOR PPTY GP Price and EPS Surprise
BRIXMOR PPTY GP Price and EPS Surprise | BRIXMOR PPTY GP Quote
However, mREIT AGNC Investment Corp., which changed its name from "American Capital Agency Corp." effective Sep 30, 2016, following the closure of AGNC's internalization on Jul 1, 2016, is likely to report an earnings surprise this quarter.
The stock has an Earnings ESP of 1.82%. This is a meaningful and leading indicator of a likely positive surprise. When positive ESP is combined with the company’s favorable Zacks Rank #3, it raises the prospect of a positive surprise this season.
However, over the trailing four quarters, the stock exceeded estimates once, and missed in the other three quarters, with an average negative surprise of 4.81%.
AGNC INVESTMENT Price and EPS Surprise
AGNC INVESTMENT Price and EPS Surprise | AGNC INVESTMENT Quote
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Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>