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REITs to Watch for Earnings on Apr 26: DLR, IRM, KIM & CUBE
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We are in the heart of the Q1 reporting cycle and the real estate investment trust (REIT) space is bustling with activity. In fact, there is a deluge of Q1 earnings releases lined up for this week, of which Digital Realty Trust (DLR - Free Report) , Iron Mountain Incorporation (IRM - Free Report) , Kimco Realty Corporation (KIM - Free Report) and Cubesmart (CUBE - Free Report) will release their quarterly numbers on Apr 26.
Per our latest Earnings Preview, total Finance Sector earnings for the Jan-Mar quarter are expected to be up 27% on 4.7% increase in revenues, as compared to the prior-year quarter. In fact, the sector witnessed 0.6% earnings growth in the prior quarter, primarily due to 4% rise in revenues.
Notably, with the underlying asset categories and the location of properties playing a crucial role in determining REITs’ performance, not all players in the space are equally poised to excel or fall behind, this season.
Therefore, let’s have a close look at the factors that will impact the above-mentioned REITs’ first-quarter results.
Digital Realty Trust is a data-center REIT that offers colocation and interconnection solutions for domestic and international tenants through its portfolio of data centers
Notably, data-center REITs have been experiencing a boom market, of late. Additionally, demand has been outpacing supply in top-tier data-center markets. Other than enjoying high occupancy, these markets are also absorbing new construction at a faster pace. Further, according to a Cisco forecast, data-center IP traffic is projected to witness a compound annual growth rate of 25%, over the 2016-2021 period.
Notably, Digital Realty, with its high-quality date centers, is well poised to benefit from this trend. Notably, the Zacks Consensus Estimate for occupancy of 90% for the first quarter indicates year-over-year growth of 1.1%.
However, Digital Realty faces intense competition in its industry. In fact, the company competes with several data-center developers, owners and operators, many of which enjoy ownership of similar assets in locations same as Digital Realty. Also, there are a number of local developers in the United States, and several regional operators in Europe, Asia and Australia. Amid this, aggressive pricing pressure is predicted to have been prevalent in the data-center market in the quarter to be reported. (Read more: Digital Realty to Post Q1 Earnings: What's in Store?)
Hence, prior to the first-quarter earnings release, there is lack of any solid catalyst. As such, the Zacks Consensus Estimate of funds from operations (FFO) per share for the first quarter remained unchanged at $1.57, over the past month.
Moreover, our proven model does not conclusively show that Digital Realty is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP, and a bullish Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. But that is not the case here, as you will see below.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
In fact, though Digital Realty has a favorable Zacks Rank of 3, its Earnings ESP of -0.25% makes surprise prediction difficult.
Over the trailing four quarters, the company beat the Zacks Consensus Estimate in all four occasions, the average beat being nearly 2.18%. This is depicted in the graph below:
Iron Mountain’s focus on setting up data-center businesses bodes well for the company. Internal storage rental growth rate for 2018 is expected in the 3-3.5% range, backed by volume growth and pricing improvement. We believe stellar organic growth and the company’s initiatives to expand its core storage business will benefit the first-quarter results.
Nevertheless, Iron Mountain has grown its business principally through acquisitions, which have affected its balance sheet in the form of a high level of goodwill. Hence, a highly leveraged balance sheet is predicted to have limited any robust margin improvement in the quarter. (Read more: What's in the Offing for Iron Mountain in Q1 Earnings?)
The Zacks Consensus Estimate for FFO per share for the soon-to-be-reported quarter is pegged at 50 cents. This indicates a 4.2% increase year over year.
Furthermore, with an Earnings ESP of 0.00% and a Zacks Rank of 2, our proven model does not conclusively show that the company will likely beat estimates this season. You can see the complete list of today’s Zacks #1 Rank stocks here.
The story about Iron Mountain’s surprise history is better told by the chart below:
Kimco Realty is taking long strides, and is progressing well with its strategic 2020 Vision. In fact, for first-quarter 2018, the company continued aggressively selling its non-core assets.
In line with its strategy, the company announced dispositions of 21 shopping centers, spanning 2.3 million square feet of space, for $219.5 million in the first quarter. Of this, the company’s share included $210.2 million. High-disposition activity can lead to earnings dilution and depress the company’s growth momentum in the quarter to be reported.
While challenges faced by retail REITs have been well documented, recent data from real estate research firm Reis states that U.S. retail real estate vacancies remained moderately unchanged at 10% for first-quarter 2018. In fact, the first few months of the year witnessed several preeminent retail bankruptcy filings and record-high defaults by retail corporate.
Although Kimco is actively enhancing omni-channel capabilities and heavily investing in redevelopment to draw customers, it might take a while for these efforts to offset the dent created in the operating results. (Read more: Why is Earnings Beat Unlikely for Kimco Realty in Q1?)
Although the company has an Earnings ESP of +0.51%, an unfavorable Zacks Rank of 4 (Sell) makes it difficult for our proven model to conclusively predict a likely earnings beat this season.
CubeSmart is a self-administered and self-managed real estate company focused on the ownership, operation, acquisition and development of self storage facilities in the United States.
Notably, the self-storage industry is anticipated to experience solid demand backed by favorable demographic changes, improving job market and rising incomes, as well as events like marriages, shifting, death, and even divorce. Also, due to shorter leasing periods, this REIT has the power to adjust its rents quickly to any rate hike.
Nevertheless, increased supply of self-storage units in a number of the company’s markets during the Jan-Mar quarter is predicted to have affected its performance. This might have dampened its same-store revenue growth as well.
Amis these, the Zacks Consensus Estimate for first-quarter revenues of $144.9 million indicates 8.9% year-over-year growth. Further, the company’s activities during the quarter could not gain adequate analyst confidence. Consequently, the Zacks Consensus Estimate for FFO per share of 39 cents for the first quarter remained unchanged, over the past month. The figure reflects 8.3% rise from the prior-year quarter.
In fact, though it has a favorable Zacks Rank of 3, its Earnings ESP of -0.37% makes surprise prediction difficult.
Over the preceding four quarters, the company met the FFO per share estimates in two occasions and beat in the other two, resulting in an average positive surprise of 1.91%. This is depicted in the graph below:
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.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Image: Bigstock
REITs to Watch for Earnings on Apr 26: DLR, IRM, KIM & CUBE
We are in the heart of the Q1 reporting cycle and the real estate investment trust (REIT) space is bustling with activity. In fact, there is a deluge of Q1 earnings releases lined up for this week, of which Digital Realty Trust (DLR - Free Report) , Iron Mountain Incorporation (IRM - Free Report) , Kimco Realty Corporation (KIM - Free Report) and Cubesmart (CUBE - Free Report) will release their quarterly numbers on Apr 26.
Per our latest Earnings Preview, total Finance Sector earnings for the Jan-Mar quarter are expected to be up 27% on 4.7% increase in revenues, as compared to the prior-year quarter. In fact, the sector witnessed 0.6% earnings growth in the prior quarter, primarily due to 4% rise in revenues.
Notably, with the underlying asset categories and the location of properties playing a crucial role in determining REITs’ performance, not all players in the space are equally poised to excel or fall behind, this season.
Therefore, let’s have a close look at the factors that will impact the above-mentioned REITs’ first-quarter results.
Digital Realty Trust is a data-center REIT that offers colocation and interconnection solutions for domestic and international tenants through its portfolio of data centers
Notably, data-center REITs have been experiencing a boom market, of late. Additionally, demand has been outpacing supply in top-tier data-center markets. Other than enjoying high occupancy, these markets are also absorbing new construction at a faster pace. Further, according to a Cisco forecast, data-center IP traffic is projected to witness a compound annual growth rate of 25%, over the 2016-2021 period.
Notably, Digital Realty, with its high-quality date centers, is well poised to benefit from this trend. Notably, the Zacks Consensus Estimate for occupancy of 90% for the first quarter indicates year-over-year growth of 1.1%.
However, Digital Realty faces intense competition in its industry. In fact, the company competes with several data-center developers, owners and operators, many of which enjoy ownership of similar assets in locations same as Digital Realty. Also, there are a number of local developers in the United States, and several regional operators in Europe, Asia and Australia. Amid this, aggressive pricing pressure is predicted to have been prevalent in the data-center market in the quarter to be reported. (Read more: Digital Realty to Post Q1 Earnings: What's in Store?)
Hence, prior to the first-quarter earnings release, there is lack of any solid catalyst. As such, the Zacks Consensus Estimate of funds from operations (FFO) per share for the first quarter remained unchanged at $1.57, over the past month.
Moreover, our proven model does not conclusively show that Digital Realty is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP, and a bullish Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. But that is not the case here, as you will see below.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
In fact, though Digital Realty has a favorable Zacks Rank of 3, its Earnings ESP of -0.25% makes surprise prediction difficult.
Over the trailing four quarters, the company beat the Zacks Consensus Estimate in all four occasions, the average beat being nearly 2.18%. This is depicted in the graph below:
Digital Realty Trust, Inc. Price and EPS Surprise
Digital Realty Trust, Inc. Price and EPS Surprise | Digital Realty Trust, Inc. Quote
Iron Mountain’s focus on setting up data-center businesses bodes well for the company. Internal storage rental growth rate for 2018 is expected in the 3-3.5% range, backed by volume growth and pricing improvement. We believe stellar organic growth and the company’s initiatives to expand its core storage business will benefit the first-quarter results.
Nevertheless, Iron Mountain has grown its business principally through acquisitions, which have affected its balance sheet in the form of a high level of goodwill. Hence, a highly leveraged balance sheet is predicted to have limited any robust margin improvement in the quarter. (Read more: What's in the Offing for Iron Mountain in Q1 Earnings?)
The Zacks Consensus Estimate for FFO per share for the soon-to-be-reported quarter is pegged at 50 cents. This indicates a 4.2% increase year over year.
Furthermore, with an Earnings ESP of 0.00% and a Zacks Rank of 2, our proven model does not conclusively show that the company will likely beat estimates this season. You can see the complete list of today’s Zacks #1 Rank stocks here.
The story about Iron Mountain’s surprise history is better told by the chart below:
Iron Mountain Incorporated Price and EPS Surprise
Iron Mountain Incorporated Price and EPS Surprise | Iron Mountain Incorporated Quote
Kimco Realty is taking long strides, and is progressing well with its strategic 2020 Vision. In fact, for first-quarter 2018, the company continued aggressively selling its non-core assets.
In line with its strategy, the company announced dispositions of 21 shopping centers, spanning 2.3 million square feet of space, for $219.5 million in the first quarter. Of this, the company’s share included $210.2 million. High-disposition activity can lead to earnings dilution and depress the company’s growth momentum in the quarter to be reported.
While challenges faced by retail REITs have been well documented, recent data from real estate research firm Reis states that U.S. retail real estate vacancies remained moderately unchanged at 10% for first-quarter 2018. In fact, the first few months of the year witnessed several preeminent retail bankruptcy filings and record-high defaults by retail corporate.
Although Kimco is actively enhancing omni-channel capabilities and heavily investing in redevelopment to draw customers, it might take a while for these efforts to offset the dent created in the operating results. (Read more: Why is Earnings Beat Unlikely for Kimco Realty in Q1?)
Although the company has an Earnings ESP of +0.51%, an unfavorable Zacks Rank of 4 (Sell) makes it difficult for our proven model to conclusively predict a likely earnings beat this season.
Kimco Realty Corporation Price and EPS Surprise
Kimco Realty Corporation Price and EPS Surprise | Kimco Realty Corporation Quote
CubeSmart is a self-administered and self-managed real estate company focused on the ownership, operation, acquisition and development of self storage facilities in the United States.
Notably, the self-storage industry is anticipated to experience solid demand backed by favorable demographic changes, improving job market and rising incomes, as well as events like marriages, shifting, death, and even divorce. Also, due to shorter leasing periods, this REIT has the power to adjust its rents quickly to any rate hike.
Nevertheless, increased supply of self-storage units in a number of the company’s markets during the Jan-Mar quarter is predicted to have affected its performance. This might have dampened its same-store revenue growth as well.
Amis these, the Zacks Consensus Estimate for first-quarter revenues of $144.9 million indicates 8.9% year-over-year growth. Further, the company’s activities during the quarter could not gain adequate analyst confidence. Consequently, the Zacks Consensus Estimate for FFO per share of 39 cents for the first quarter remained unchanged, over the past month. The figure reflects 8.3% rise from the prior-year quarter.
In fact, though it has a favorable Zacks Rank of 3, its Earnings ESP of -0.37% makes surprise prediction difficult.
Over the preceding four quarters, the company met the FFO per share estimates in two occasions and beat in the other two, resulting in an average positive surprise of 1.91%. This is depicted in the graph below:
CubeSmart Price and EPS Surprise
CubeSmart Price and EPS Surprise | CubeSmart Quote
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.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Click here to see them >>