Back to top

Image: Bigstock

Factors to Impact STAG Industrial (STAG) This Earnings Season

Read MoreHide Full Article

STAG Industrial, Inc. (STAG - Free Report) is slated to report second-quarter 2022 earnings on Jul 27 after market close. The company’s quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.

In the last reported quarter, this industrial real estate investment trust (“REIT”) delivered a surprise of 1.92% in terms of FFO per share. Results reflected better-than-expected revenues.

Over the trailing four quarters, STAG Industrial beat estimates on three occasions and missed the same on the other, the average beat being 1.98%. This is depicted in the graph below:

Stag Industrial, Inc. Price and EPS Surprise

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

Despite economic headwinds in the second quarter, demand in the U.S. industrial market outpaced supply for the seventh straight quarter, per a report from Cushman & Wakefield ("CWK"). There was a net absorption of 120.4 million square feet (msf) of space in the June-end quarter and 236.3 msf through the first half of the year. Moreover, the new leasing activity touched 408.2 msf in the first half of the year.

The U.S. industrial vacancy rate reached a new low of 3.1% in the April-June period. This marks a decline of 10 basis points (bps) quarter over quarter and 120 bps year over year. Moreover, it represents the second straight quarter when every region in the United States reported vacancy less than 4%, with the lowest in the West region at only 2.4%.

Continued tight market conditions and solid demand supported the rent growth of 19% year over year during the June-end quarter. The asking rent of $8.36 per square foot (psf) during the quarter under discussion turned out to be the first quarter to surpass the $8.00 psf mark in the 20+ years of tracking rental data, per the CWK report.

STAG Industrial, which focuses on the acquisition and operation of single-tenant, industrial properties throughout the United States, is also 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, STAG is likely to have captured favorable fundamentals.

The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $160.7 million, suggesting a 16.1% year-over-year jump.

STAG Industrial is also expected to have continued with its capital recycling efforts.

The Zacks Consensus Estimate for the quarterly FFO per share of 53 cents calls for a 1.92% increase year over year.

However, with the asset category being attractive, there is a development boom in many markets. Per the CWK report, the new supply aggregated 193.8 msf in the first half of the year compared with the 151.9 msf reported in the midyear of 2021, denoting a 27.5% increase.

Also, the industrial construction pipeline reached a record 699 msf in the second quarter of 2022. The high supply is likely to have intensified competition during the June-end quarter.

Here Is What Our Quantitative Model Predicts:

Our proven model does not conclusively predict a surprise in terms of FFO per share for STAG Industrial this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.

STAG Industrial currently carries a Zacks Rank of 4 (Sell) and has an Earnings ESP of -0.38%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are some stocks from the REIT sector — American Tower Corporation (AMT - Free Report) , Public Storage (PSA - Free Report) and SBA Communications Corporation (SBAC - 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.

American Tower Corporation, scheduled to report second-quarter earnings on Jul 28, currently has an Earnings ESP of +1.65% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Public Storage, slated to release quarterly numbers on Aug 4, has an Earnings ESP of +0.31% and carries a Zacks Rank of 3 at present.

SBA Communications Corporation, scheduled to report quarterly numbers on Aug 1, currently has an Earnings ESP of +1.40% and carries a Zacks Rank of 3.

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.

Published in