STAG Industrial, Inc. (STAG Quick QuoteSTAG - Free Report) is slated to report fourth-quarter and full-year 2021 earnings on Feb 16 after market close. The company’s quarterly results are likely to reflect growth in both revenues and funds from operations (FFO) per share.

In the last reported quarter, this industrial real estate investment trust (REIT) delivered a surprise of 3.92% in terms of core FFO per share. Results reflected better-than-expected revenues.

Over the preceding four quarters, STAG Industrial surpassed FFO per share estimates on each occasion, the average beat being 3.57%. This is depicted in the graph below:

Stag Industrial, Inc. Price and EPS Surprise

Stag Industrial, Inc. price-eps-surprise | Stag Industrial, Inc. Quote

Let’s see how things have shaped up before this announcement.

Factors at Play

The U.S. industrial real estate market is firing on all cylinders, ending the year with record demand, which surpassed the supply for the fourth quarter consecutively, per a report from Cushman & Wakefield (CWK).

There was a net absorption of 145.2 million square feet (msf) of space in the December-end quarter, marking the second-highest amount of space absorbed in a single quarter reported by CWK. The tally is 47.9% higher than 99.7 msf reported in the fourth quarter of 2020. With this, the 2021 absorption reached 532.6 msf, reflecting the most absorption recorded in a single year since the start of record-keeping in 1995. Also, it marked the first time when net demand exceeded 400 msf. The figure also rose 86% from 2020’s reported tally of 286.4 msf. In 2021, new leasing activity also reached a record of 879.9 msf, up 25% from 703 msf reported in 2020.

The U.S. industrial vacancy rate came in at 3.7% in 2021, which is now 220 basis points less than the 10-year historical average of 5.9%. It also marks an all-time record low. Continued tight market conditions, aggressive competition and solid demand aided rent growth during the December-end quarter, which increased 9.5% year over year to $7.39 per square foot. In 2021, rent growth had been steadily accelerating in each quarter.

Amid these, STAG, which is focused on the acquisition and operation of single-tenant, industrial properties throughout the United States, is poised to benefit. Its portfolio is widely distributed across geography, tenant, industry and lease term.

This REIT is anticipated to have witnessed healthy demand on the fast adoption of e-commerce, with leasing activity getting support in the to-be-reported quarter. Moreover, with supply chains transforming for faster fulfillment and resilience, the company is likely to have captured favorable fundamentals with its strategically located properties and robust investment activity.

The company’s expansion efforts through acquisitions in recent years are likely to have boosted the top line during the to-be-reported quarter. STAG Industrial acquired 24 buildings in the third quarter of 2021, comprising 4.0 million square feet, for $427.2 million. This trend is expected to have continued in the fourth quarter as well. In addition, the company is likely to have maintained its focus on the investment grade balance sheet with low leverage and high liquidity.

The Zacks Consensus Estimate for quarterly revenues is pegged at $147.06 million, suggesting a 13.2% year-over-year increase.

The Zacks Consensus Estimate for quarterly FFO per share has remained unrevised at 52 cents in the past month. However, the figure also suggests a year-over-year increase of 6.12%.

For the full year, the Zacks Consensus Estimate for FFO per share has remained unchanged at $2.06 over the past month. However, the figure indicates a 9% increase year over year on revenues of $561.6 million.

However, with the asset category being attractive in current challenging times, there is a development boom in some markets. The United States delivered 355.6 msf of new industrial products in 2021. This is almost close to 355.8 msf reported in 2020, which is a record, per the report from CWK. In the second half of the year, there was a pick-up in completions compared with the first two quarters, aggregating 103.9 msf in the third quarter and 100.9 msf in the fourth quarter. This high supply is likely to have intensified competition and affected pricing power during the December-end quarter.

Here Is What Our Quantitative Model Predicts:

STAG Industrial does not have the right combination of two key elements — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an FFO beat.

Earnings ESP: STAG Industrial has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Zacks Rank: STAG currently carries a Zacks Rank of 3.

Stocks That Warrant a Look

Here are three stocks from the REIT sector — Host Hotels & Resorts, Inc. (HST Quick QuoteHST - Free Report) , Life Storage, Inc. and National Storage Affiliates Trust (NSA Quick QuoteNSA - Free Report) — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.

Host Hotels & Resorts, slated to release fourth-quarter earnings on Feb 16, has an Earnings ESP of +61.38% and carries a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Life Storage, scheduled to report quarterly numbers on Feb 24, has an Earnings ESP of +0.66% and carries a Zacks Rank of 3.

National Storage Affiliates Trust, slated to report quarterly numbers on Feb 22, has an Earnings ESP of +1.06% and carries a Zacks Rank of 2.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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.