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REITs to Watch for Q1 Earnings on May 5: HCN, SNH, DRH
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The current reporting cycle is drawing to a close but results are still pouring in from the real estate investment trust (REIT) industry. On May 5, Welltower Inc. , Senior Housing Properties Trust and DiamondRock Hospitality Company (DRH - Free Report) are slated to release their quarterly figures.
In the broader market, results from over 350 S&P 500 members that are already out reveal a substantial improvement from the recent past quarters. These companies have not only managed to show improvement in earnings and revenues, but have also mostly surpassed expectations, specifically, revenue estimates. (Read more: Impressive Growth in Q1 Earnings Season)
However, the performance of the REIT sector has so far been mixed. Obviously, the rate hike issue was a dominant factor in the first quarter, but underlying asset category dynamics and location of properties played a key role in the operating performance of REITs. While some markets like industrial real estate, data center and office revealed strength, retail and residential markets had their issues.
In fact, per a study by the commercial real estate services’ firm – CBRE Group Inc. – the overall U.S. industrial real estate market remained upbeat in first-quarter 2017, with an essentially unchanged national availability rate despite increased supply.
On the other hand, the overall office vacancy rate moved up a modest 10 basis points to 13.0% in the first quarter amid increased supply, according to a report from CBRE. In fact, despite an overall increase, in almost half of the office markets, vacancy level continued to fall and the national office vacancy rate remained close to its post-recession low. Also, growth in cloud computing, Internet of Things and big data are not only helping tech companies, these are also driving demand for data center REITs.
However, things are not so pretty on the other side. An increasing number of deliveries of new units in a number of key markets and elevated concession activity have raised concerns over some residential REIT stocks, while dwindling mall traffic and store closures amid aggressive growth in online sales kept retail REITs on tenterhooks.
Therefore, not all players in the REIT space are equally poised to excel this time around. 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. 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.
We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Let’s have a look at what’s in store for the three REITs set to release their first-quarter results on Friday:
Toledo, OH-based healthcare REIT Welltower’s efficiency in improving its healthcare real estate portfolio quality, along with lower leverage, is expected to serve as a growth driver for the company in the to-be-reported quarter.
However, it has an Earnings ESP of +0.96% and a Zacks Rank #4. Though a positive ESP is a significant indicator for an earnings beat, we also need to have a favorable Zacks Rank to be reasonably confident of a positive surprise.
Notably, increasing senior housing supply is likely to limit occupancy growth and taper pricing power. Also, expenses are anticipated to remain elevated in the quarter. As such, growth in net operating income is likely to remain limited. Moreover, as part of its portfolio-repositioning efforts, the company is aggressively disposing its assets. Though such efforts are commendable, the earnings dilutive effects of these moves cannot be ignored. (Read more: What's in the Cards for Welltower in Q1 Earnings?)
However, over the trailing four quarters, the company surpassed estimates on all occasions, with an average beat of 1.12%. This is depicted in the graph below.
Senior Housing Properties Trust is a Newton, MA-based healthcare REIT that invests in senior living communities; office buildings leased to medical providers, medical-related businesses, clinics, and biotech laboratory tenants; along with wellness centers.
Senior Housing Properties Trust has a mixed surprise history over the trailing four quarters with an average surprise of 0.51%. While it exceeded estimates on two occasions, it met in another and missed in the other.
Senior Housing Properties Trust Price and EPS Surprise
DiamondRock Hospitality Company is a Bethesda, MD-based hotel-REIT which owns a portfolio of premium hotels and resorts comprising more than 9,600 rooms in aggregate. These are concentrated in key gateway cities and destination resorts throughout North America and the U.S. Virgin Islands.
However, it has an Earnings ESP of 0.00% and a Zacks Rank #3. Therefore, our proven model does not conclusively show that DiamondRock Hospitality will beat on earnings this season because it lacks the right combination required for an earnings beat prediction.
Nevertheless, DiamondRock Hospitality exceeded estimates in three quarters and missed in the other, resulting in an average positive surprise of 5.48% for the trailing four quarters. This is depicted in the chart below.
Diamondrock Hospitality Company Price and EPS Surprise
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Image: Bigstock
REITs to Watch for Q1 Earnings on May 5: HCN, SNH, DRH
The current reporting cycle is drawing to a close but results are still pouring in from the real estate investment trust (REIT) industry. On May 5, Welltower Inc. , Senior Housing Properties Trust and DiamondRock Hospitality Company (DRH - Free Report) are slated to release their quarterly figures.
In the broader market, results from over 350 S&P 500 members that are already out reveal a substantial improvement from the recent past quarters. These companies have not only managed to show improvement in earnings and revenues, but have also mostly surpassed expectations, specifically, revenue estimates. (Read more: Impressive Growth in Q1 Earnings Season)
However, the performance of the REIT sector has so far been mixed. Obviously, the rate hike issue was a dominant factor in the first quarter, but underlying asset category dynamics and location of properties played a key role in the operating performance of REITs. While some markets like industrial real estate, data center and office revealed strength, retail and residential markets had their issues.
In fact, per a study by the commercial real estate services’ firm – CBRE Group Inc. – the overall U.S. industrial real estate market remained upbeat in first-quarter 2017, with an essentially unchanged national availability rate despite increased supply.
On the other hand, the overall office vacancy rate moved up a modest 10 basis points to 13.0% in the first quarter amid increased supply, according to a report from CBRE. In fact, despite an overall increase, in almost half of the office markets, vacancy level continued to fall and the national office vacancy rate remained close to its post-recession low. Also, growth in cloud computing, Internet of Things and big data are not only helping tech companies, these are also driving demand for data center REITs.
However, things are not so pretty on the other side. An increasing number of deliveries of new units in a number of key markets and elevated concession activity have raised concerns over some residential REIT stocks, while dwindling mall traffic and store closures amid aggressive growth in online sales kept retail REITs on tenterhooks.
Therefore, not all players in the REIT space are equally poised to excel this time around. 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. 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.
We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Let’s have a look at what’s in store for the three REITs set to release their first-quarter results on Friday:
Toledo, OH-based healthcare REIT Welltower’s efficiency in improving its healthcare real estate portfolio quality, along with lower leverage, is expected to serve as a growth driver for the company in the to-be-reported quarter.
However, it has an Earnings ESP of +0.96% and a Zacks Rank #4. Though a positive ESP is a significant indicator for an earnings beat, we also need to have a favorable Zacks Rank to be reasonably confident of a positive surprise.
Notably, increasing senior housing supply is likely to limit occupancy growth and taper pricing power. Also, expenses are anticipated to remain elevated in the quarter. As such, growth in net operating income is likely to remain limited. Moreover, as part of its portfolio-repositioning efforts, the company is aggressively disposing its assets. Though such efforts are commendable, the earnings dilutive effects of these moves cannot be ignored. (Read more: What's in the Cards for Welltower in Q1 Earnings?)
However, over the trailing four quarters, the company surpassed estimates on all occasions, with an average beat of 1.12%. This is depicted in the graph below.
Welltower Inc. Price and EPS Surprise
Welltower Inc. Price and EPS Surprise | Welltower Inc. Quote
Senior Housing Properties Trust is a Newton, MA-based healthcare REIT that invests in senior living communities; office buildings leased to medical providers, medical-related businesses, clinics, and biotech laboratory tenants; along with wellness centers.
Though it has a favorable Zacks Rank #3, its Earnings ESP of -2.13% makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.
Senior Housing Properties Trust has a mixed surprise history over the trailing four quarters with an average surprise of 0.51%. While it exceeded estimates on two occasions, it met in another and missed in the other.
Senior Housing Properties Trust Price and EPS Surprise
Senior Housing Properties Trust Price and EPS Surprise | Senior Housing Properties Trust Quote
DiamondRock Hospitality Company is a Bethesda, MD-based hotel-REIT which owns a portfolio of premium hotels and resorts comprising more than 9,600 rooms in aggregate. These are concentrated in key gateway cities and destination resorts throughout North America and the U.S. Virgin Islands.
However, it has an Earnings ESP of 0.00% and a Zacks Rank #3. Therefore, our proven model does not conclusively show that DiamondRock Hospitality will beat on earnings this season because it lacks the right combination required for an earnings beat prediction.
Nevertheless, DiamondRock Hospitality exceeded estimates in three quarters and missed in the other, resulting in an average positive surprise of 5.48% for the trailing four quarters. This is depicted in the chart below.
Diamondrock Hospitality Company Price and EPS Surprise
Diamondrock Hospitality Company Price and EPS Surprise | Diamondrock Hospitality Company Quote
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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