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REITs to Watch for Q2 Earnings on Aug 9: LHO, UNIT & More

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We are in the final leg of the Q2 earnings season, and 381 members of the elite S&P 500 index have already reported their financial numbers as of Aug 2. Per the latest Earnings Preview, the performance of these index constituents reflects 25% increase in total earnings on 10.4% higher revenues. Further, 80.1% companies surpassed bottom-line expectations, while 73.8% outperformed on the top-line front. This uptrend paints an encouraging picture of the ongoing reporting cycle.

In fact, the Finance sector (one of the 16 Zacks sectors) is expected to deliver earnings growth of 20.5% on 6.3% higher revenues for the June-end quarter.

No doubt, the recent rate hikes have kept investors in the real estate investment trust (REIT) space worried to some extent. This is because REITs depend on debt for their business, and pay high and consistent dividend. Thus, a higher rate affects the present value of future cash flows.

Nevertheless, with the most recent interest-rate hike, the Fed signals that the economy is growing at a ‘solid’ pace. Hence, economic strength and healthy consumer sentiment will likely mitigate the impact of higher interest rates. Further, demand for a number of asset categories is expected to have displayed strength in the April-June quarter.

Therefore, surprises might be in store for some REITs, while others may disappoint this earnings season. Per the quantitative Zacks model, stocks with the perfect combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP have substantially higher chances of beating estimates. 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 Rank stocks here.

Let us take a look at how the following REITs are placed ahead of their quarterly releases on Aug 9.

On May 23, LaSalle Hotel Properties (LHO - Free Report) announced that it has reached a definitive agreement with affiliates of Blackstone Group LP (BX - Free Report) , per which the private equity behemoth will acquire all outstanding common shares of LaSalle for $33.50 per share, in an all-cash deal, valuing the acquisition at $4.8 billion. The acquisition awaits shareholder approval through a special meeting that will take place on Sep 6.

However, as a stand-alone company, its Q2 results will likely reflect year-over-year decline in funds from operations (FFO) per share and revenues. Nonetheless, the Zacks Consensus Estimate for second-quarter room revenues is pinned at $218 million, reflecting a 40.6% year-over-year improvement.

It has an Earnings ESP of +1.11% and a Zacks Rank of 3, which is a favorable combination indicating likely positive earnings surprise this season.

The company’s earnings surprise history is depicted in the graph below:

The Zacks Consensus Estimate for Uniti Group Inc.’s (UNIT - Free Report) ) Q2 FFO is pegged at 63 cents, reflecting a 5% year-over-year improvement. Revenues for the quarter are expected to rise 17.3% year over year to $249.8 million.

Though the company has a Zacks Rank of 3, its Earnings ESP of 0.00% reduces the odds of a positive earnings surprise.

The company’s track record shows earnings beat in two of the preceding four quarters and misses in the other two, the average being a positive 12.5%. The same is depicted in the chart below.

JBG SMITH Properties (JBGS - Free Report)  manages residential, office, retail and mixed-use properties spanning nearly 20 million square feet of space. Its properties are concentrated in the Washington, DC submarket region. The company has an extensive development pipeline spanning 17.9 million square feet.

The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $139.8 million.

Prior to the Q2 earnings release, there is lack of any solid catalyst for raising optimism about the company’s business activities and prospects. As such, the Zacks Consensus Estimate for FFO per share remained unchanged at 47 cents over the past month.

The company has a Zacks Rank of 3. However, its Earnings ESP of 0.00% reduces the odds of a positive earnings surprise.

Hospitality Properties Trust (HPT - Free Report) owns a diverse portfolio of hotels and travel centers. For the to-be-reported quarter, hotel operating revenues are expected to increase 14.1% to $508 million. Further, revenue per available room (RevPAR) is projected at $105 million, indicating a 16.7% sequential increase. 

Prior to the second-quarter earnings release, there is lack of any solid catalyst for raising optimism about the company’s business activities and prospects. As such, the Zacks Consensus Estimate for FFO per share remained unchanged at $1.07 over the past month. This reflects a rise of 0.94% over the prior year. 

The company has a Zacks Rank of 3. However, its Earnings ESP of 0.00% reduces the odds of a positive earnings surprise.

The company’s earnings surprise history is depicted in the graph below:

Americold Realty Trust (COLD - Free Report) is a REIT focused on owning and operating temperature-controlled warehouses. It boasts the largest network of these sort of facilities in the world, making it a dominant force in global food distribution and retail industries.

The Zacks Consensus Estimate for second-quarter 2018 revenues is pegged at $392.02 million.

The company has a Zacks Rank of 3. However, its Earnings ESP of 0.00% reduces the odds of a positive earnings surprise.

Prior to the June-end quarter’s earnings release, there is lack of any solid catalyst for raising optimism about the company’s business activities and prospects. As such, the Zacks Consensus Estimate for FFO per share remained unchanged at 29 cents over the past month.

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.

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