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What's in Store for Realty Income (O) This Earnings Season?
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Realty Income Corp. (O - Free Report) is scheduled to report third-quarter 2017 results after the market closes on Oct 25.
Last quarter, this monthly dividend paying real estate investment trust (REIT) delivered an in-line performance, in terms of funds from operations (FFO) per share. Results indicated higher-than-expected growth in revenues.
However, Realty Income has a mixed surprise history. The company surpassed estimates in two occasions and met in the other two, over the trailing four quarters, resulting in an average positive surprise of 1.00%. This is depicted in the graph below:
The Zacks Consensus Estimate for third-quarter FFO per share is currently pegged at 76 cents.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Realty Income’s portfolio is well diversified with respect to tenant, industry, geography and property type. It targets well located, free-standing, single-tenant, net-lease commercial properties. The company generates majority of its annualized retail rental revenue from tenants with a service, non-discretionary, and/or low-price point component to their business.
However, the retail real estate market remained turbulent amid retailer bankruptcies and store closures. Moreover, competition remained solid in the quarter. In addition, the company has substantial exposure to single tenant assets which raises its risks associated with tenant default.
Amid these, growth in same-store rent is like to be modest. In fact, the Zacks Consensus Estimate for rental revenues for the to-be-reported quarter is currently pegged at $291 million, reflecting around 1% increase from the prior quarter.
Realty Income’s activities during the quarter failed to gain analysts’ confidence. Consequently, the Zacks Consensus Estimate for the third quarter FFO per share remained unchanged over the last 30 days.
Realty Income has lost 2.4% of its value year to date versus the 4.6% decline of its industry.
Earnings Whispers
Our proven model does not conclusively show that Realty Income will likely beat estimates this season. 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. However, that is not the case here as you will see below.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -0.55%.
Zacks Rank: Realty Income has a Zacks Rank #3 (Hold).
Although a favorable rank increases the predictive power of ESP, we need to have a positive ESP to be confident of an earnings beat.
Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
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:
Digital Realty Trust, Inc. (DLR - Free Report) , scheduled to release earnings on Oct 25, has an Earnings ESP of +0.24% and a Zacks Rank #2.
Cousins Properties Inc. (CUZ - Free Report) , slated to release quarterly numbers on Oct 25, has an Earnings ESP of +1.13% and a Zacks Rank #3.
Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share. 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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What's in Store for Realty Income (O) This Earnings Season?
Realty Income Corp. (O - Free Report) is scheduled to report third-quarter 2017 results after the market closes on Oct 25.
Last quarter, this monthly dividend paying real estate investment trust (REIT) delivered an in-line performance, in terms of funds from operations (FFO) per share. Results indicated higher-than-expected growth in revenues.
However, Realty Income has a mixed surprise history. The company surpassed estimates in two occasions and met in the other two, over the trailing four quarters, resulting in an average positive surprise of 1.00%. This is depicted in the graph below:
Realty Income Corporation Price and EPS Surprise
Realty Income Corporation Price and EPS Surprise | Realty Income Corporation Quote
The Zacks Consensus Estimate for third-quarter FFO per share is currently pegged at 76 cents.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Realty Income’s portfolio is well diversified with respect to tenant, industry, geography and property type. It targets well located, free-standing, single-tenant, net-lease commercial properties. The company generates majority of its annualized retail rental revenue from tenants with a service, non-discretionary, and/or low-price point component to their business.
However, the retail real estate market remained turbulent amid retailer bankruptcies and store closures. Moreover, competition remained solid in the quarter. In addition, the company has substantial exposure to single tenant assets which raises its risks associated with tenant default.
Amid these, growth in same-store rent is like to be modest. In fact, the Zacks Consensus Estimate for rental revenues for the to-be-reported quarter is currently pegged at $291 million, reflecting around 1% increase from the prior quarter.
Realty Income’s activities during the quarter failed to gain analysts’ confidence. Consequently, the Zacks Consensus Estimate for the third quarter FFO per share remained unchanged over the last 30 days.
Realty Income has lost 2.4% of its value year to date versus the 4.6% decline of its industry.
Earnings Whispers
Our proven model does not conclusively show that Realty Income will likely beat estimates this season. 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. However, that is not the case here as you will see below.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -0.55%.
Zacks Rank: Realty Income has a Zacks Rank #3 (Hold).
Although a favorable rank increases the predictive power of ESP, we need to have a positive ESP to be confident of an earnings beat.
Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
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:
CoreSite Realty Corporation (COR - Free Report) , slated to release third-quarter results on Oct 26, has an Earnings ESP of +0.76% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Digital Realty Trust, Inc. (DLR - Free Report) , scheduled to release earnings on Oct 25, has an Earnings ESP of +0.24% and a Zacks Rank #2.
Cousins Properties Inc. (CUZ - Free Report) , slated to release quarterly numbers on Oct 25, has an Earnings ESP of +1.13% and a Zacks Rank #3.
Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share. 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.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>