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REITs to Watch for Q3 Earnings on Nov 2: SBAC, O, PEAK, VNO

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A number of real estate investment trusts’ (“REIT”) earnings releases are lined up for the next week — including SBA Communications Corporation (SBAC - Free Report) , Realty Income (O - Free Report) , Healthpeak Properties, Inc. (PEAK - Free Report)  and Vornado Realty Trust (VNO - Free Report) , which will release their third-quarter numbers on Monday.

Since REITs invest in a wide range of properties, including residential, industrial, offices, malls, hospitals, hotels and data centers, and several others, the underlying asset categories and the location of properties play a significant role in determining their performance.

This has been even more relevant in the current times, where individual states are adopting differing policies for lifting the pandemic-related restrictions. Moreover, the disruption in the economy and its effects have widely varied across different property types, with tower REITs and data-center REITs emerging as “stay-at-home winners”, while retail and office landlords continue to struggle with rent collection and occupancy woes.

Healthcare REITs too have had their share of troubles in the third quarter, with record-low occupancy and high instances of coronavirus cases at senior housing facilities dragging performances of companies.

Let’s take a sneak peek into how the following REITs are poised prior to their third-quarter earnings release.

SBA Communications has been making continued efforts to expand its tower portfolio into select markets, with high-growth characteristics on the back of acquisitions and development. This positioned it well to benefit from the high demand for towers, spurring from significant growth in the overall network utilization amid the work-from-home environment.

Markedly, the Zacks Consensus Estimate for third-quarter total revenues is pinned at $516.7 million. This indicates growth of 1.8% from the year-ago reported figure. Also, the Zacks Consensus Estimate for third-quarter funds from operations (FFO) per share has been unchanged at $2.32 over the past month. It suggests year-over-year growth of 7.9%.

However, a decline in consulting and construction-related carrier activities is likely to have hurt site-development revenues for the September-end quarter.

The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of a FFO beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Our proven model does not conclusively predict a beat in terms of FFO per share for SBA Communications this season, as it has a Zacks Rank of 3 and an Earnings ESP of 0.00%. (Read more: Factors Affecting SBA Communications' Q3 Earnings)

The chart below shows the company’s earnings surprise over the trailing four quarters.

SBA Communications Corporation Price and EPS Surprise

 

SBA Communications Corporation Price and EPS Surprise

SBA Communications Corporation price-eps-surprise | SBA Communications Corporation Quote

Vornado’s third-quarter performance is expected to have been affected by the battered office real estate market of New York City, given its dominance in the region.

Further, amid these pandemic-led disruptions in businesses, the financial condition and liquidity of the company’s office and retail tenants have likely deteriorated, impairing their ability to pay rents. This has likely compelled it to write-off such uncollectible. In fact, it expects non-cash write-offs of receivables, arising from the straight-lining of rents, and write-offs for uncollectible tenant receivables to reduce third-quarter FFO per share by 7 cents and 6 cents, respectively.

These are likely to have hindered FFO growth for the quarter. In fact, the consensus estimate for third-quarter FFO per share of 67 cents indicates a year-over-year decline of 24.7%.

Moreover, the Zacks Consensus Estimate for third-quarter revenues is pinned at $362.9 million, suggesting a year-over-year decline of 22%.(Read more: Overdue Rents, Low Leasing to Hurt Vornado's Q3 Earnings)

Our proven model does not conclusively predict a beat in terms of FFO per share for the company this season, as it has a Zacks Rank of 5 (Strong Sell) and an Earnings ESP of -4.51%.

The chart below shows the company’s earnings surprise over the trailing four quarters.

Vornado Realty Trust Price and EPS Surprise

 

Vornado Realty Trust Price and EPS Surprise

Vornado Realty Trust price-eps-surprise | Vornado Realty Trust Quote

Realty Income’s exposure to essential retail tenants has been the saving grace during the pandemic. Moreover, across the company’s total portfolio, as of Oct 1, contractual rent receipts improved to 93.8% for September from 93.6% for August, 92.5% for July and 88.3% for the second quarter. With this, the contractual rent collection for the third quarter totaled 93.3%.

This is likely to have boosted top-line growth. In fact, the Zacks Consensus Estimate for quarterly revenues is pegged at $408.3 million, suggesting a 9.1% increase from the year-ago quarter.

However, the company’s tenants from theater as well as health and fitness have been adversely impacted by the government-mandated closures and social-distancing requirements, resulting in high uncollected rent from such tenants.

The Zacks Consensus Estimate for the third-quarter FFO per share moved up a cent to 83 cents in a month. However, it indicates no year-over-year movement. (Read more: Realty Income to Post Q3 Earnings: A Surprise in Store?)

Our proven model predicts a beat in terms of FFO per share for the company this season as it currently has a Zacks Rank #3 and an Earnings ESP of +2.91%.

The chart below shows the company’s earnings surprise over the trailing four quarters.

Realty Income Corporation Price and EPS Surprise

 

Realty Income Corporation Price and EPS Surprise

Realty Income Corporation price-eps-surprise | Realty Income Corporation Quote

Healthpeak’s three senior housing businesses — senior housing triple-net, senior housing operating portfolio ("SHOP'), continuing care retirement community, which account for 29% of net operating income — have not been immune to the adverse trends in the seniors housing industry and are expected to have been adversely impacted by the COVID-19 pandemic.

In fact, as of Aug 31, spot occupancy at its SHOP portfolio was 77.1%, declining 100 basis points from the July-end numbers.

Demand for life science properties is expected to have remained strong in the third quarter, given the increasing need for effective diagnostics, therapies and vaccines to combat the coronavirus pandemic. Hence, Healthpeak’s life science assets are expected to have continued to perform well in the third quarter, driven by robust leasing and occupancy increases.

This along with healthy rent collections from life-science, medical office and triple-net leased tenants is likely to have supported revenue growth for the company in the third quarter.

In fact, total revenues for the third quarter are pegged at $606.8 million, suggesting year-over-year growth of 12.8%.

However, the Zacks Consensus Estimate for the third-quarter FFO per share has been unchanged at 39 cents over the past month. It also suggests an 11.4% year-over-year decline. (Read more: What’s in the Offing for Healthpeak in Q3 Earnings?)

Our proven model does not conclusively predict a beat in terms of FFO per share for the company this season, as it has a Zacks Rank of 3 (Hold) and an Earnings ESP of 0.00%.

The chart below shows the company’s earnings surprise over the trailing four quarters.

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.

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