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What to Expect From STAG Industrial (STAG) in Q2 Earnings?
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STAG Industrial (STAG - Free Report) , a leading real estate investment trust (REIT) focused on industrial properties, is set to release its second-quarter 2023 earnings on Jul 26 after market close.
In the last reported quarter, this REIT’s core FFO per share came in line with the Zacks Consensus Estimate. Over the trailing four quarters, STAG Industrial beat estimates on two occasions, met on another and missed the same once, the average beat being 2.36%.
The graph below depicts the surprise history of the company:
The U.S. industrial real estate sector, while exhibiting signs of normalization following the extraordinary demand spike during the pandemic, continues to project healthy fundamentals. In this article, we will examine how the company is likely to have performed in the second quarter of 2023, considering the current economic environment.
Industrial Real Estate Market Fundamentals in Q2
Per a Cushman & Wakefield (CWK - Free Report) report, the industrial real estate sector is starting to normalize after two years of exceptional demand fueling cumulative rent growth of 30% or more. Net absorption for the second quarter measuring 44.9 million square feet (msf) marks a drop from the heights of the previous year. However, it is still in line with healthy pre-pandemic absorption levels.
Leasing activity too mirrors this trend amid economic challenges. While the gross new leasing of 141.1 msf is down 8.9% from the first quarter, it is still in line with the quarterly average experienced from 2015 to 2019. The rise in vacant sublease space in certain markets has a moderating effect on overall absorption figures.
The second quarter saw a swift influx of new industrial supply, with a staggering 139.5 msf of new developments reaching completion. Amid this, the national vacancy rate increased by 60 basis points to 4.1%, surpassing the 4% mark for the first time since mid-2021. Despite the rise, the vacancy rate remains well below the 10-year average, suggesting a resilient market.
However, despite softening market conditions, rents continued to rise. Second-quarter asking rental rates increased by 4.6% quarter over quarter, pushing the figure to $9.59 per square foot (psf). In many markets, the healthy delivery of Class A speculative logistics space at a premium price is exerting upward pressure on prices. However, amid the slowing demand, developers are dialing down, with the construction pipeline declining by 5.1% quarter over quarter.
STAG Industrial's Portfolio & Strategy
STAG Industrial is anticipated to have witnessed healthy demand for 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. These are likely to have supported STAG’s occupancy and rental rates in the second quarter.
In its June presentation, STAG noted that as of May 25, 2023, 86.1% of expected 2023 new and renewal leasing has been addressed, comprising 11.3 million square feet. The company achieved a cash rent change of 30%.
As of May 25, 2023, STAG Industrial already leased 8.0 million square feet of space and experienced a cash rent change of 26.7%. The weighted average lease term is 4.2 years. STAG’s retention adjusted for immediate backfills was 86%. Additional leases are expected to have been executed and commenced in the rest of the second quarter.
However, rising supply in several markets, which is likely to fuel competition, and the stabilization of e-commerce sales growth raise concerns. Finally, interest rates remain a key factor for REITs like STAG Industrial. High interest rates can make it more expensive for the company to borrow money, which can impact its ability to acquire new properties.
Projections for Q2 2023
The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $171.71 million. This suggests a 6.32% year-over-year rise.
Before the second-quarter earnings release, STAG Industrial’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly core FFO per share has remained unchanged at 56 cents in the past month. It also suggests no year-over-year growth.
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 3 and 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.
Stocks That Warrant a Look
Our model shows that American Tower Corporation (AMT - Free Report) and Americold Realty Trust, Inc. (COLD - Free Report) have the right combination of elements to report a surprise this quarter.
American Tower Corporation is slated to report quarterly numbers on Jul 27. AMT has an Earnings ESP of +1.55% and carries a Zacks Rank of 3 presently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Americold Realty Trust, scheduled to report quarterly numbers on Aug 3, has an Earnings ESP of +17.90% and carries a Zacks Rank of 3.
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.
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What to Expect From STAG Industrial (STAG) in Q2 Earnings?
STAG Industrial (STAG - Free Report) , a leading real estate investment trust (REIT) focused on industrial properties, is set to release its second-quarter 2023 earnings on Jul 26 after market close.
In the last reported quarter, this REIT’s core FFO per share came in line with the Zacks Consensus Estimate. Over the trailing four quarters, STAG Industrial beat estimates on two occasions, met on another and missed the same once, the average beat being 2.36%.
The graph below depicts the surprise history of the company:
Stag Industrial, Inc. Price and EPS Surprise
Stag Industrial, Inc. price-eps-surprise | Stag Industrial, Inc. Quote
The U.S. industrial real estate sector, while exhibiting signs of normalization following the extraordinary demand spike during the pandemic, continues to project healthy fundamentals. In this article, we will examine how the company is likely to have performed in the second quarter of 2023, considering the current economic environment.
Industrial Real Estate Market Fundamentals in Q2
Per a Cushman & Wakefield (CWK - Free Report) report, the industrial real estate sector is starting to normalize after two years of exceptional demand fueling cumulative rent growth of 30% or more. Net absorption for the second quarter measuring 44.9 million square feet (msf) marks a drop from the heights of the previous year. However, it is still in line with healthy pre-pandemic absorption levels.
Leasing activity too mirrors this trend amid economic challenges. While the gross new leasing of 141.1 msf is down 8.9% from the first quarter, it is still in line with the quarterly average experienced from 2015 to 2019. The rise in vacant sublease space in certain markets has a moderating effect on overall absorption figures.
The second quarter saw a swift influx of new industrial supply, with a staggering 139.5 msf of new developments reaching completion. Amid this, the national vacancy rate increased by 60 basis points to 4.1%, surpassing the 4% mark for the first time since mid-2021. Despite the rise, the vacancy rate remains well below the 10-year average, suggesting a resilient market.
However, despite softening market conditions, rents continued to rise. Second-quarter asking rental rates increased by 4.6% quarter over quarter, pushing the figure to $9.59 per square foot (psf). In many markets, the healthy delivery of Class A speculative logistics space at a premium price is exerting upward pressure on prices. However, amid the slowing demand, developers are dialing down, with the construction pipeline declining by 5.1% quarter over quarter.
STAG Industrial's Portfolio & Strategy
STAG Industrial is anticipated to have witnessed healthy demand for 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. These are likely to have supported STAG’s occupancy and rental rates in the second quarter.
In its June presentation, STAG noted that as of May 25, 2023, 86.1% of expected 2023 new and renewal leasing has been addressed, comprising 11.3 million square feet. The company achieved a cash rent change of 30%.
As of May 25, 2023, STAG Industrial already leased 8.0 million square feet of space and experienced a cash rent change of 26.7%. The weighted average lease term is 4.2 years. STAG’s retention adjusted for immediate backfills was 86%. Additional leases are expected to have been executed and commenced in the rest of the second quarter.
However, rising supply in several markets, which is likely to fuel competition, and the stabilization of e-commerce sales growth raise concerns. Finally, interest rates remain a key factor for REITs like STAG Industrial. High interest rates can make it more expensive for the company to borrow money, which can impact its ability to acquire new properties.
Projections for Q2 2023
The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $171.71 million. This suggests a 6.32% year-over-year rise.
Before the second-quarter earnings release, STAG Industrial’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly core FFO per share has remained unchanged at 56 cents in the past month. It also suggests no year-over-year growth.
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 3 and 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.
Stocks That Warrant a Look
Our model shows that American Tower Corporation (AMT - Free Report) and Americold Realty Trust, Inc. (COLD - Free Report) have the right combination of elements to report a surprise this quarter.
American Tower Corporation is slated to report quarterly numbers on Jul 27. AMT has an Earnings ESP of +1.55% and carries a Zacks Rank of 3 presently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Americold Realty Trust, scheduled to report quarterly numbers on Aug 3, has an Earnings ESP of +17.90% 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.