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REITs to Watch for Earnings on Feb 7: CPT, DEI, LPT, HIW
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As we tread into another busy week of the current reporting cycle, a lot of activity can be noticed in the real estate investment trust (REIT) space. In fact, there is a deluge of Q4 earnings releases this week, with Camden Property Trust (CPT - Free Report) , Douglas Emmett, Inc. (DEI - Free Report) , Liberty Property Trust and Highwoods Properties, Inc. (HIW - Free Report) , reporting their numbers on Feb 7.
The sentiment, so far, has been mixed, with results from some of the top notch REIT stocks either matching estimates or beating, while some other falling shy of expectations. On one side, amid decline in revenues, SL Green Realty Corp. (SLG - Free Report) narrowly missed expectations; while on the other side, growth in net operating income from newly developed and existing operating communities helped AvalonBay Communities, Inc.’s (AVB - Free Report) to deliver a surprise of around 1%. Again, Industrial REIT like Prologis, Inc. (PLD - Free Report) came up with an in-line result.
Obviously, rate hike issue has been a consistent theme in the quarter and finally the increase did happen in December, when the U.S. Federal Reserve raised the key interest rates by 25 basis points to the range of 0.50–0.75%, the second hike since Dec 2015. The quarter was also subject to a lot of political uncertainty, with the presidential election taking place in the month of November. Further, there had been bond rout amid Trump’s promise of a strong fiscal stimulus.
Nevertheless, REITs have already managed their balance sheet well and focused on lowering debt ratios. In addition, rates are still much low, giving room to REITs to absorb future hikes.
However, as apart from the rate factor, the performance of REIT stocks depends on the individual asset class dynamics; it is important to first study the fundamentals of the underlying asset category before making any investment.
Notably, in the fourth quarter, office and industrial asset categories hogged the limelight for experiencing high demand. Going by numbers, per a study by the commercial real estate services’ firm CBRE Group Inc. , for the U.S. industrial market, availability fell for 26 straight quarters to 8.2% in fourth-quarter 2016. Moreover, the overall office vacancy rate declined 10 basis points (bps) to 12.9% in fourth-quarter 2016, denoting the lowest level since first-quarter 2008.
However, supply issues in a number of markets have raised concerns for some of the residential REIT stocks. In fact, in Q4, national effective rent growth climbed 2.3% according to early apartment data from AXIOMetrics. This was over 2 percentage points lower than the 4.6% rent growth experienced in the year-ago quarter. In addition, occupancy of 94.7% in the fourth quarter was down from 95.1% in the third quarter and 95.0% in fourth-quarter 2015. Furthermore, dwindling mall traffic and store closures amid aggressive growth in online sales kept retail REITs on tenterhooks.
Therefore, surprises might be in store for some and disappointment for other REITs, this earnings season. However to predict that, we rely on the Zacks methodology, combining a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) – and a positive Earnings ESP, to predict the chances of a beat this quarter. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Per our proprietary methodology, Earnings ESP shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Research shows that with this combination of rank and ESP, chances of a positive earnings surprise are as high as 70% for the stocks.
Let’s have a look at what’s in store for the four REITs set to release their results on Tuesday:
Residential REIT, Camden Property Trust is engaged in the ownership, management, development, redevelopment, acquisition, and construction of multi-family apartment communities. It has a Zacks Earnings ESP of 0.88% and a Zacks Rank #3. Notably, a positive ESP is a major indicator of a likely positive surprise. Moreover, this combination of its Zacks Rank #3 and positive ESP makes us reasonably confident of a positive surprise this season.
Camden Property Trust has exceeded estimates in three quarters and met in the other occasion, posting an average positive surprise of 1.10%, for the trailing four quarters. This is depicted in the chart below.
Douglas Emmett, one of the largest owners and operators of high-quality office and multi-family properties located in the premier coastal submarkets of Los Angeles and Honolulu, has an Earnings ESP of 0.00% and a Zacks Rank #3. Our proven model does not conclusively show that Douglas Emmett is likely to post a positive surprise in the quarter as it does not have the right combination of rank and ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the trailing four quarters, the company posted an average beat of 2.26%, having beaten the Zacks Consensus Estimate in three and meeting in another quarter. This is reflected in the chart below:
Liberty Property Trust is engaged in development, acquisition, leasing and managing a portfolio which consists of industrial and office properties. This Zacks Rank #3 stock has an Earnings ESP of 0.00%. This stock also lacks the right combination required for an earnings beat prediction.
This stock has met estimates in three of the trailing four quarters with an average beat of 1.99%, as demonstrated in the chart below:
Highwoods Properties is an office REIT engaged in ownership, development, acquisition, leasing and management of properties mainly in the best business districts (BBDs) of Atlanta, Greensboro, Memphis, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and Tampa. This Zacks Rank #3 stock has an Earnings ESP of 1.22% and we expect this stock to beat expectations in the to-be-reported quarter.
Notably, Highwoods Properties has exceeded estimates in each of the trailing four quarters, with an average beat of 2.19%. This is depicted in the graph below.
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REITs to Watch for Earnings on Feb 7: CPT, DEI, LPT, HIW
As we tread into another busy week of the current reporting cycle, a lot of activity can be noticed in the real estate investment trust (REIT) space. In fact, there is a deluge of Q4 earnings releases this week, with Camden Property Trust (CPT - Free Report) , Douglas Emmett, Inc. (DEI - Free Report) , Liberty Property Trust and Highwoods Properties, Inc. (HIW - Free Report) , reporting their numbers on Feb 7.
The sentiment, so far, has been mixed, with results from some of the top notch REIT stocks either matching estimates or beating, while some other falling shy of expectations. On one side, amid decline in revenues, SL Green Realty Corp. (SLG - Free Report) narrowly missed expectations; while on the other side, growth in net operating income from newly developed and existing operating communities helped AvalonBay Communities, Inc.’s (AVB - Free Report) to deliver a surprise of around 1%. Again, Industrial REIT like Prologis, Inc. (PLD - Free Report) came up with an in-line result.
Obviously, rate hike issue has been a consistent theme in the quarter and finally the increase did happen in December, when the U.S. Federal Reserve raised the key interest rates by 25 basis points to the range of 0.50–0.75%, the second hike since Dec 2015. The quarter was also subject to a lot of political uncertainty, with the presidential election taking place in the month of November. Further, there had been bond rout amid Trump’s promise of a strong fiscal stimulus.
Nevertheless, REITs have already managed their balance sheet well and focused on lowering debt ratios. In addition, rates are still much low, giving room to REITs to absorb future hikes.
However, as apart from the rate factor, the performance of REIT stocks depends on the individual asset class dynamics; it is important to first study the fundamentals of the underlying asset category before making any investment.
Notably, in the fourth quarter, office and industrial asset categories hogged the limelight for experiencing high demand. Going by numbers, per a study by the commercial real estate services’ firm CBRE Group Inc. , for the U.S. industrial market, availability fell for 26 straight quarters to 8.2% in fourth-quarter 2016. Moreover, the overall office vacancy rate declined 10 basis points (bps) to 12.9% in fourth-quarter 2016, denoting the lowest level since first-quarter 2008.
However, supply issues in a number of markets have raised concerns for some of the residential REIT stocks. In fact, in Q4, national effective rent growth climbed 2.3% according to early apartment data from AXIOMetrics. This was over 2 percentage points lower than the 4.6% rent growth experienced in the year-ago quarter. In addition, occupancy of 94.7% in the fourth quarter was down from 95.1% in the third quarter and 95.0% in fourth-quarter 2015. Furthermore, dwindling mall traffic and store closures amid aggressive growth in online sales kept retail REITs on tenterhooks.
Therefore, surprises might be in store for some and disappointment for other REITs, this earnings season. However to predict that, we rely on the Zacks methodology, combining a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) – and a positive Earnings ESP, to predict the chances of a beat this quarter. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Per our proprietary methodology, Earnings ESP shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Research shows that with this combination of rank and ESP, chances of a positive earnings surprise are as high as 70% for the stocks.
Let’s have a look at what’s in store for the four REITs set to release their results on Tuesday:
Residential REIT, Camden Property Trust is engaged in the ownership, management, development, redevelopment, acquisition, and construction of multi-family apartment communities. It has a Zacks Earnings ESP of 0.88% and a Zacks Rank #3. Notably, a positive ESP is a major indicator of a likely positive surprise. Moreover, this combination of its Zacks Rank #3 and positive ESP makes us reasonably confident of a positive surprise this season.
Camden Property Trust has exceeded estimates in three quarters and met in the other occasion, posting an average positive surprise of 1.10%, for the trailing four quarters. This is depicted in the chart below.
Camden Property Trust Price and EPS Surprise
Camden Property Trust Price and EPS Surprise | Camden Property Trust Quote
Douglas Emmett, one of the largest owners and operators of high-quality office and multi-family properties located in the premier coastal submarkets of Los Angeles and Honolulu, has an Earnings ESP of 0.00% and a Zacks Rank #3. Our proven model does not conclusively show that Douglas Emmett is likely to post a positive surprise in the quarter as it does not have the right combination of rank and ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the trailing four quarters, the company posted an average beat of 2.26%, having beaten the Zacks Consensus Estimate in three and meeting in another quarter. This is reflected in the chart below:
Douglas Emmett, Inc. Price and EPS Surprise
Douglas Emmett, Inc. Price and EPS Surprise | Douglas Emmett, Inc. Quote
Liberty Property Trust is engaged in development, acquisition, leasing and managing a portfolio which consists of industrial and office properties. This Zacks Rank #3 stock has an Earnings ESP of 0.00%. This stock also lacks the right combination required for an earnings beat prediction.
This stock has met estimates in three of the trailing four quarters with an average beat of 1.99%, as demonstrated in the chart below:
Liberty Property Trust Price and EPS Surprise
Liberty Property Trust Price and EPS Surprise | Liberty Property Trust Quote
Highwoods Properties is an office REIT engaged in ownership, development, acquisition, leasing and management of properties mainly in the best business districts (BBDs) of Atlanta, Greensboro, Memphis, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and Tampa. This Zacks Rank #3 stock has an Earnings ESP of 1.22% and we expect this stock to beat expectations in the to-be-reported quarter.
Notably, Highwoods Properties has exceeded estimates in each of the trailing four quarters, with an average beat of 2.19%. This is depicted in the graph below.
Highwoods Properties, Inc. Price and EPS Surprise
Highwoods Properties, Inc. Price and EPS Surprise | Highwoods Properties, Inc. Quote
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>