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Key Factors to Impact Innovative Industrial (IIPR) Q4 Earnings

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Innovative Industrial Properties, Inc. (IIPR - Free Report) is scheduled to report fourth-quarter and full-year 2020 results on Feb 24, after the bell. The company’s quarterly results will likely display year-on-year growth in revenues and funds from operations (FFO) per share.

In the last reported quarter, this real estate investment trust (REIT), focused on the cannabis-centered real estate portfolio, delivered a positive surprise of 10.34% in terms of adjusted funds from operations (FFO).

Results reflected increase in rental revenues, driven mainly by the acquisition and leasing of new properties, in addition to contractual rental escalations at certain properties and partial repayment of deferrals of rent commencing on Jul 1, 2020, from three of the company’s tenants.

Let’s see how things have shaped up prior to the earnings release.

Factors at Play

Innovative Industrial Properties, focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated state-licensed cannabis facilities, is likely to keep gaining from its acquisitions.

The legalization of marijuana’s medical use across several states in the United States, as well as the permission of adult consumption in some, has created opportunities for the cannabis industry. Therefore, with more states in the nation giving cannabis the green light, Innovative Industrial Properties has incentives to partner with experienced medical-use cannabis operators, and serve as a vital source of capital by acquiring and leasing back their real-estate assets. Its strategy is to acquire the existing, redeveloped and under-development industrial buildings, including attached enclosed greenhouse facilities.

Expansion efforts continued in the fourth quarter too, resulting in the company owning 66 properties as of Dec 17, 2020. The properties aggregate 5.4 million rentable square feet that were 99.3% leased, with a weighted-average remaining lease term of 16.6 years. These expansion efforts are likely to have boosted the top line during the December-end quarter.

Particularly, in December, Innovative Industrial Properties announced the acquisition of Massachusetts and Washington Properties, for a total of $33 million. Management also revealed entering into long-term leases with 4Front. The company also expanded its real estate partnership with PharmaCann at New York property, committing additional $31 million for future redevelopment, extending lease term through 2040. Also, it expanded the long-term real estate partnership with Kings Garden with the acquisition of New California Property for $25.4 million.

Innovative Industrial Properties is anticipated to have benefited from expansion measures during the quarter under review on contributions from acquisitions and leasing of new properties, along with contractual rental escalations at some properties.

Moreover, in a number of states, cannabis businesses were also considered essential during the pandemic. Also, improvement in COVID-induced expansion in delivery systems and introduction of curbside pick-ups are encouraging, and are likely to have fueled top-line growth.

The Zacks Consensus Estimate for quarterly revenues is currently pegged at $37.9 million, suggesting a surge of 114.2% year on year.

Nonetheless, Innovative Industrial Properties’ activities during the quarter in discussion were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the fourth-quarter FFO per share has been revised five cents downward to $1.51 in a month’s time. Nevertheless, it calls for 27.97% year-over-year growth.

For the full year, the Zacks Consensus Estimate for FFO per share has been revised 5 cents downward to $5.06 over the past month. The figure, however, suggests a 54.7% increase year on year. Revenues are projected to soar 161.4% year over year to $116.75 million.

Here is what our quantitative model predicts:

Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Innovative Industrial Properties this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Innovative Industrial Properties currently carries a Zacks Rank of 3 and has an Earnings ESP of -6.62%.

Stocks to Consider

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:

American Tower Corporation (AMT - Free Report) , set to report quarterly numbers on Feb 25, currently has an Earnings ESP of +7.49% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Public Storage (PSA - Free Report) , slated to release earnings figures on Feb 24, has an Earnings ESP of +0.53% and holds a Zacks Rank of 3, currently.

CubeSmart (CUBE - Free Report) , scheduled to announce fourth-quarter results on Feb 25, has an Earnings ESP of +0.69% and carries a Zacks Rank of 3, at present.

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.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

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