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What's in the Cards for EPR Properties (EPR) in Q2 Earnings?

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EPR Properties (EPR - Free Report) is scheduled to report second-quarter 2017 results on Aug 3, after the closing bell.

In the prior quarter, this real estate investment trust (“REIT”) experienced a negative surprise of 3.36% in terms of funds from operations (“FFO”) per share. Results reflected lower-than-expected growth in revenues.

Over the trailing four quarters, the company surpassed estimates in three occasions and missed in the other. This resulted in an average negative surprise of 0.01%. The graph below depicts the surprise history of the company:

EPR Properties Price and EPS Surprise

Note: The EPS numbers presented in the above chart represent funds from operations (“FFO”) per share.

However, EPR Properties’ shares have climbed 0.9% year to date, against the industry’s loss of 4.7%.

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

Factors to Consider

EPR Properties is a specialty REIT that focuses on investments in properties across three primary market segments – Entertainment, Recreation and Education. Strategic investment in each of its segments and a diversified tenant base are likely to support second-quarter results. In fact, upbeat consumer confidence and an improving economy are anticipated to drive the company’s performance.

Specifically, the Entertainment segment is likely to benefit from growth in millennial generation. This is because millennials constitute the major chunk of frequent moviegoers and over time this group has been growing considerably. Moreover, the renovation works, and new food and beverage concepts introduced in megaplex theatres are aimed at improving customer experience and are likely to improve attendance and enhance revenues in the to-be-reported quarter.

Also, with an economic recovery backed by job growth, the Recreation segment promises an impressive performance, led by solid demand for properties. Further, EPR Properties is well poised to benefit from investments in the Education segment and experience growth in enrollment as there is a healthy demand for quality education and associated facilities amid modest supply.

However, expenses are predicted to remain elevated in the quarter under review. Specifically, payroll and benefit costs are likely to be higher because of additional staff required for supporting the company’s asset base. Also, the company has a substantial development pipeline which increases its operational risks. Further, increase in interest rate can add to its woes.

In addition, over the past seven days, the Zacks Consensus Estimate for second-quarter FFO per share remained unchanged at $1.24, reflecting lack of any positive catalyst for being extremely positive on the stock.

Earnings Whispers

Our proven model does not conclusively show that EPR Properties will likely beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP for EPR Properties is 0.00%. This is because the Most Accurate estimate of $1.24 matches the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: EPR Properties’ Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

Stocks That Warrant a Look

Here are a few stocks in the REIT space that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this time around:

CyrusOne Inc. (CONE - Free Report) , likely to release earnings on Aug 2, has an Earnings ESP of +2.70% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Piedmont Office Realty Trust, Inc. (PDM - Free Report) , expected to release earnings on Aug 2, has an Earnings ESP of +2.27% and a Zacks Rank #3.

Condor Hospitality Trust Inc. (CDOR - Free Report) , likely to release quarterly numbers on Aug 7, has an Earnings ESP of +16.0% and a Zacks Rank #3.

Note:  FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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