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Key Factors to Impact SL Green (SLG) Earnings This Season

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SL Green Realty Corp. (SLG - Free Report) is slated to report second-quarter 2018 results on Jul 18, after the market closes. The company’s results will likely reflect year-over-year decline in its funds from operations (FFO) per share and revenues.

In the last reported quarter, this real estate investment trust (REIT) surpassed its FFO estimates. The company experienced an increase in same-store cash net operating income (NOI), including the share of same-store cash NOI from unconsolidated joint ventures that rose 7.4% year over year. However, the company’s Q1 results reflected an overall fall in revenues.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate in two occasions, missed in another and met in the other. It delivered an average positive surprise of 1.4% during this period. The graph below depicts this surprise history:

SL Green Realty Corporation Price and EPS Surprise
 

Shares of SL Green have gained 8.3% over the past six months compared with the industry’s rally of 6.1%.


 

Factors That Might Influence Q2 Results

During the quarter under review, SL Green made significant efforts to revamp its portfolio on the back of strategic acquisitions and disposal of non-core assets. Efforts to increase value creation through diligent repositioning and leasing of its New York City portfolio augur well amid the recovery in job markets. Such portfolio repositioning will likely have resulted in higher occupancy and leasing in this office landlord’s portfolio in the April-June quarter.

Also, the Zacks Consensus Estimate for second-quarter property operating revenues is currently pegged at $249 million, reflecting an increase of 2.9% from the previous-quarter figure. Further, the Zacks Consensus Estimate for escalation and reimbursement income is projected at $33.3 million, indicating 26.2% growth sequentially.

Moreover, during the to-be-reported quarter, the company resorted to significant sub-urban dispositions that are anticipated to have provided this REIT with significant dry power to fund share buybacks, long-term core asset acquisitions, and investment in debt and preferred equities.

Also, with a $500-million increase in its share buyback program, the company is now authorized to repurchase $2 billion worth shares. Notably, it has repurchased a total of 15,067,975 shares. Such share buybacks not only boost investor confidence but are also accretive to net asset value (NAV).  

Nonetheless, high exposure to assets in New York City and Manhattan remain concerns. Also, over the past month, the Zacks Consensus Estimate for FFO per share for the quarter to be reported has been revised downward by a cent to $1.68.

Earnings Whispers

Here is what our quantitative model predicts:

SL Green has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Zacks ESP: The Earnings ESP for SL Green is +0.17%.

Zacks Rank: The company currently carries a Zacks Rank #3.

A positive Earnings ESP is a meaningful and leading indicator of a likely beat in terms of FFO per share. This, when combined with a favorable Zacks rank, makes us reasonably confident of a positive surprise.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

Ventas Inc. (VTR - Free Report) , slated to release second-quarter results on Jul 27, has an Earnings ESP of +2.52% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Vornado Realty Trust (VNO - Free Report) , scheduled to release earnings on Jul 30, has an Earnings ESP of +1.39% and a Zacks Rank #3.

HCP, Inc. (HCP - Free Report) , slated to release second-quarter results on Aug 2, has an Earnings ESP of +0.66% and a Zacks Rank of 3.

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.

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