It has been about a month since the last earnings report for Alexandria Real Estate Equities (ARE - Free Report) . Shares have added about 0.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Alexandria Real Estate Equities due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Alexandria Q2 FFO In Line, Revenues Miss, '18 View Up
Alexandria Real Estate Equities reported second-quarter 2018 adjusted FFO of $1.64 per share, which came in line with the Zacks Consensus Estimate. The figure also compares favorably with the year-ago tally of $1.50.
Results reflect decent internal and external growth. The company witnessed increase in rental rate and NOI.
Total revenues for the quarter jumped 19% year over year to $325 million. However, the revenue figure missed the Zacks Consensus Estimate of $330.8 million.
Behind the Headline Numbers
Alexandria’s total leasing activity aggregated around 985,996 rentable square feet (RSF) of space during the quarter under review. The company carried out lease renewals and re-leasing of space at rental rate growth of 24% and 12.8% (cash basis), respectively, during the quarter. In addition, key leases executed in Q2 included 152,157 RSF at the 215 First Street property in the Cambridge submarket leased to Sarepta Therapeutics, Inc. and 110,000 RSF at 960 Industrial Road in Greater Stanford submarket leased to Joby Aero, Inc.
On a year-over-year basis, same-property NOI grew 4.1%. It climbed 6.3% on a cash basis. Occupancy of operating properties in North America remained high at 97.1%.
As of second-quarter 2018, investment-grade or large-cap tenants accounted for 55% of annual rental revenues in effect. Furthermore, 78% of the annual rental revenues are from Class A properties in AAA locations.
Notably, during the second-quarter and July 2018, the company acquired 14 properties and four land parcels, for a total of $662.9 million.
Alexandria exited the second quarter with cash and cash equivalents of $287 million, down from $221.6 million reported at the end of the previous quarter. The company had $2.9 billion of liquidity as of the end of the second quarter.
Alexandria expects adjusted FFO per share of $6.57 to $6.63, up from the previous projection of $6.52 to $6.62 for 2018. The company’s 2018 guidance is backed by expectations for occupancy in North America (as of Dec 31, 2018) in the band of 97.1-97.7%, rental rate increases for lease renewals and re-leasing of space of 17-20%, and same-property NOI growth of 2.5-4.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, Alexandria Real Estate Equities has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Alexandria Real Estate Equities has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.