We are in one of the busiest weeks of the current reporting cycle, and it’s natural for investors to be lured by big profits and huge surprises of companies that have already released their quarterly numbers. But instead of accumulating the stock later, investing in ones that are poised for a beat can be far more rewarding. This is because earnings beats essentially raise investors’ confidence in a stock and results in further price appreciation.

And if you believed that the rate hike in March and projections for the number of increases this year and in the next have put REITs in the back foot, then perhaps you need to reconsider. Because not only have the REITs made their balance sheets less leveraged, they have locked in the low rates by borrowing at a fixed rate and extending the average maturity of their debt outstanding to more than six years. This financial flexibility is encouraging down the line for their operational efficiencies.

Moreover, high consumer confidence in an improving economy and job market gains are fueling consumption levels. In fact, with one eventually requiring “real space” for economic activities, prospects of the real estate sector are getting a boost as growth in the economy translates into greater demand for real estate and higher occupancy levels.

Particularly, consider the industrial REITs where availability fell for 31 straight quarters to 7.3% for the U.S. industrial market in first-quarter 2018, per a study by the commercial real estate services firm — CBRE Group Inc. (CBRE Quick QuoteCBRE - Free Report) . High consumption levels, strengthening e-commerce market, and a healthy manufacturing environment amid a recovering economy and job market are fueling demand.

Also, despite several preeminent retail bankruptcy filings and record-high defaults by retail corporates, recent data from Reis shows that for the neighborhood and community shopping centers, the vacancy rate remained moderately unchanged at 10% for first-quarter 2018.

This stability clearly reflects the concerted efforts of the retail landlords to boost productivity of retail assets by trying to grab attention from new and productive tenants. Also, with limited retail supply, refurbishment of existing properties is gaining traction. Retail REITs are now avoiding heavy dependence on apparel and accessories, and rather expanding dining options, opening movie theaters, offering recreational facilities and opening fitness centers in particular.

Moreover, in the national apartment market, despite high supply and a seasonally slow first-quarter leasing period, thanks to the cold weather that inhibits shift of households, occupancy level remained elevated and came in at 94.5% this March, just a notch lower than the prior-year tally of 95%, per the latest report from the real estate technology and analytics firm — RealPage, Inc. . This is clearly reflective of decent apartment demand.

In the office sector too, though the supply of new office space has slightly pushed up occupancy levels (by 20 bps) to 13.3% (per CBRE Group data), demand for high-quality, efficient space remains strong. This is indicated by the pre-leasing of around 70% of space being delivered in Q1. Also, improved business travel demand with lower cancellations and higher group spends, plus strong demand from leisure division signal better prospects for hotel REITs.

The Zacks Methodology

However, in spite of the drivers, choosing the right stock could be quite difficult unless one knows the proper method. To make the task simple 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.

Our proprietary methodology, Earnings ESP, shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. And research shows that for stocks with this combination of rank and ESP, chances of a positive earnings surprise are as high as 70%.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Here are three REITs that have the right combination of elements to deliver an earnings beat when they release their quarterly numbers:

Pebblebrook Hotel Trust (PEB Quick QuotePEB - Free Report) has a Zacks Rank #3 and an Earnings ESP of +8.3%. The Zacks Consensus Estimate for the quarter is pegged at 58 cents, denoting a year-over-year projected increase of roughly 7.4%. The company has been a steady performer, having exceeded the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 11.4%.

Bethesda, MD-based Pebblebrook Hotel Trust is a hotel REIT focusing on opportunistic acquisitions and investments in mainly upper upscale, full-service hotels located in urban markets in major gateway cities in the United States. Backed by improved demand for its properties, the company recently issued a better outlook for its first-quarter results.

Pebblebrook Hotel Trust is set to report results on Apr 26.

Preferred Apartment Communities, Inc. has a Zacks Rank #3 and an Earnings ESP of +5.00%. The Zacks Consensus Estimate for the quarter is pegged at 33 cents. The company has a long-term growth rate of 7%. It delivered positive surprises in three of the trailing four quarters, with an average beat of around 2.9%.

Atlanta, GA-based Preferred Apartment Communities acquires and operates multifamily properties primarily in the United States. The company is likely to experience decent demand for its properties backed by an improving economy and job market gains, favorable demographics and household formation.

Preferred Apartment Communities is expected to report quarterly numbers around May 7.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Simon Property Group Inc. (SPG Quick QuoteSPG - Free Report) carries a Zacks Rank #3 and has an Earnings ESP of +0.32%. The Zacks Consensus Estimate is pegged at $2.83, which denotes expected year-over-year growth of 3.3%. Further, the company has a long term growth rate of 6.5%, ahead of the industry average of 5.4%.

Indianapolis, IN-based Simon Property Group is a global leader in the ownership of premier shopping, dining, entertainment and mixed-use destinations. It boasts a strong and improving balance sheet. Moreover, the company is focused on overhauling its properties and increasingly adopting omni-channel strategies.

Simon Property is slated to report results on Apr 27.

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.

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.

See This Ticker Free >>