Back to top

REITs to Watch for Earnings on April 23: ELS, ACC, SUI & ADC

Read MoreHide Full Article

As we are about to enter another eventful week of the current reporting cycle, real estate investment trusts (REIT) will be seeing a busy Monday. Four REITs — Equity Lifestyle Properties (ELS - Free Report) , American Campus Communities (ACC - Free Report) , Sun Communities (SUI - Free Report) and Agree Realty Corporation (ADC - Free Report) — are slated to report their Q1 numbers on Apr 23, after the closing bell.

Going by numbers, the latest report from the real estate technology and analytics firm — RealPage, Inc. (RP - Free Report) — states that the national apartment market moderated in first-quarter 2018, with occupancy shrinking slightly and rent growth slowing down. Nevertheless, the first quarter marks a slow leasing period, owing to the cold weather that inhibits shift of households and limits growth in demand.

In fact, annual rent growth shrunk to 2.3% in Q1. This reflects moderation from the 2.6-2.9% growth rate experienced throughout 2017. Occupancy level of 94.5% in March 2018 edged down from the prior-year tally of 95%, with metros having subdued construction activity faring well and recording the strongest occupancy. Nevertheless, the overall occupancy level is still healthy.

Another report by RealPage states that performance of the student housing sector remains stable. Particularly, increasing number of giveaways being offered and proximity to campus are aiding the healthy leasing volumes of this sector. Nonetheless, this sector has witnessed slight moderation in rent growth. Also, going by the numbers, 15 schools with more than 1,000 off-campus beds, currently under construction, are scheduled to be delivered in 2018. Hence, operational efficiency and an effective leasing strategy will play key roles in the performance of student housing REITs.     

While challenges faced by retail REITs have been well documented, recent data from Reis states that U.S. retail real estate vacancies remained moderately unchanged at 10% for first-quarter 2018. Although the first few months of 2018 witnessed several preeminent retail bankruptcy filings and record-high defaults by retail corporates, stability in the vacancy rates indicates an encouraging picture for 2018 retail REITs.

Furthermore, mall landlords are quickly adapting to the changing retail landscape by reducing dependence on apparel and accessories, and considering dining and entertainment options to boost traffic. This raises optimism in retail REITs.

Let us take a look at how the above-mentioned REITs are placed ahead of their quarterly releases.    

Residential REIT Equity Lifestyle Properties’ funds from operations (FFO) per share are expected to improve in the to-be-reported quarter. The Zacks Consensus Estimate for FFO per share is $1.04, reflecting year-over-year increase of 4%. However, the Zacks Consensus Estimate for sales of $230.1 million indicates 1% decline from the prior-year quarter.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate in two occasions and met in the other two, delivering an average positive surprise of 0.8%. This is depicted in the graph below:

Equity Lifestyle Properties, Inc. Price and EPS Surprise
 

This Zacks Rank #3 (Hold) stock has an Earnings ESP of 0.00%. Therefore, according to our quantitative model, it cannot be conclusively predicted whether or not Equity Lifestyle will likely beat the Zacks Consensus Estimate in the quarter. In fact, though a favorable Zacks Rank increases the predictive power of Earnings ESP, we also need to have a positive ESP to be confident of an earnings beat.

(You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.)

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

American Campus Communities’FFO per share is expected to improve year over year. The Zacks Consensus Estimate for FFO per share for first-quarter 2018 of 64 cents reflects a 3.23% improvement as compared to the previous year. We also predict a rise in the company’s total revenues in the quarter to be reported. The Zacks Consensus Estimate for total revenues for the quarter is currently pegged at $220.8 million. This reflects an improvement of 14.5% from the prior-year quarter.

The company surpassed estimates in two occasions for as many misses, resulting in an average negative surprise of 1.2%. This is depicted in the graph below:

American Campus Communities Inc Price and EPS Surprise
 

This Zacks Rank #3 company has an Earnings ESP of -1.31%. Therefore, according to our quantitative model, we cannot conclusively predict a likely earnings beat for American Campus Communities in the upcoming results.

Sun Communities acquires, operates and develops manufactured homes and RV communities. The company’s FFO per share and revenues are expected to improve in the first quarter. The Zacks Consensus Estimate for FFO per share is $1.14, highlighting year-over-year rise of 3.64%. Further, the Zacks Consensus Estimate for sales of $247.4 million indicates 5.5% growth from the prior-year quarter.

Over the preceding four quarters, the company outpaced the Zacks Consensus Estimate in three occasions and met in the other, coming up with an average positive surprise of 1.5%. This is depicted in the graph below:

Sun Communities, Inc. Price and EPS Surprise
 

Although the stock has a favorable Zacks Rank of 2 (Buy), an Earning ESP of 0.00% makes a surprise prediction difficult for the quarter.

Agree Realty Corporationis primarily engaged in the acquisition and development of properties net leased to retail tenants. The company is expected to experience a rise in minimum rents. The Zacks Consensus Estimate for minimum rents of $30.2 million for the to-be-reported quarter shows 8% increase on a sequential basis.

Also, revenues from other sources will likely go up, marginally. The Zacks Consensus Estimate for other revenues for the first quarter is pegged at $0.04 million. Notably, the Zacks Consensus Estimate for FFO per share for the quarter is 71 cents, reflecting year-over-year rise of 9.23%. The consensus estimate for sales of $33.5 million indicates 25.9% growth from the prior-year quarter. 

The company beat the Zacks Consensus Estimate in three occasions and met in the other, recording an average positive surprise of 0.73%. This is depicted in the graph below:

Agree Realty Corporation Price and EPS Surprise
 

Currently, the company has an Earnings ESP of -1.21% and a Zacks Rank of 3. So, we can’t conclusively predict a likely earnings beat.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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 >>



More from Zacks Analyst Blog

You May Like