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We expect leading multi-family real estate investment trust (REIT) – Equity Residential (EQR - Analyst Report) –to beat expectations when it reports fourth-quarter 2012 results after the closing bell tomorrow, Feb 5.

Why a Likely Positive Surprise?

Our proven model shows that Equity Residential is likely to beat earnings because it has the appropriate combination of two key ingredients:

Positive Zacks ESP: Earnings ESP (Read: Zacks Earnings ESP: A Better Method) is +2.67% as the Most Accurate Estimate stands at 77 cents per share and the Zacks Consensus Estimate is 75 cents. This indicates a likely positive earnings surprise.

Zacks Rank #3 (Hold): Equity Residential’s Zacks Rank # 3 increases the predictive power of its ESP. The combination of its Zacks Rank and Earnings ESP makes us confident of a positive earnings surprise in the to-be-reported quarter.

Stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.

Key Earnings Drivers

Equity Residential is well poised to maintain its growth curve backed by its diverse portfolio of properties in some of the best long-term apartment markets in the country. Moreover, the strengthening apartment fundamentals and superior execution of pricing and expense control measures are expected to lead to a positive earnings surprise in the fourth quarter.

The company is actively repositioning its portfolio, which will further strengthen its presence in the upscale region. In addition, the sale of non-core assets and the Archstone acquisition fit well with its growth strategy.

Notably, this deal, that was penned along with Avalonbay Communities Inc. (AVB - Analyst Report), which entitles Equity Residential to acquire 60% of Archstone’s assets and liabilities (and the rest to be acquired by Avalonbay), will help improve the overall quality of the portfolio with assets in high-barrier, high-growth coastal markets.

Other Stocks to Consider

Equity Residential is not the only stock looking up this earnings season. We also see likely earnings beats coming from these 2 REITs:

Prologis Inc. (PLD - Analyst Report) has an Earnings ESP of +7.32% and a Zacks Rank #3 (Hold). The company is scheduled to report its earnings on Feb 6 before the opening bell.

Ventas Inc. (VTR - Analyst Report) has an Earnings ESP of +2.06% and a Zacks Rank #2. The company is scheduled to report its earnings on Feb 15 before the opening bell.

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