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Key Factors to Impact Duke Realty (DRE) Earnings This Season

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Duke Realty Corp. (DRE - Free Report) is scheduled to report third-quarter 2018 results on Oct 24, after the market closes. The company’s results will likely reflect year-over-year growth in its funds from operations (FFO) per share and revenues.

In the last reported quarter, this industrial real estate investment trust (REIT) delivered an in-line performance with respect to the FFO per share. However, the company exceeded the Zacks Consensus Estimate in two out of the trailing four quarters and met estimates in the other two occasions, with the average beat being 1.7%. The graph below depicts this surprise history:

Duke Realty Corporation Price and EPS Surprise

Duke Realty Corporation Price and EPS Surprise | Duke Realty Corporation Quote

Let’s see how things are shaping up.

Factors That Might Influence Q3 Results

Duke Realty has resorted to sale of suburban office assets and medical-office buildings in the past, in a bid to transform the company into a domestic-focused industrial property REIT. The move was indeed a strategic fit as the industrial real estate market is now firing on all cylinders, backed by an improving economy and job-market gains, strengthening e-commerce market, and high consumption levels.

Particularly, demand for warehouses, distribution centers and other industrial property remains strong, and continues to surpass supply levels. Per a study by the commercial real estate services firm — CBRE Group Inc. (CBRE - Free Report) — availability fell for 33 straight quarters to 7.1% for the U.S. industrial real estate market in the Jul-Sep quarter. Notably, this denotes the lowest level since 2000.

As for Duke Realty, its solid capacity to leverage on this favorable trend is likely to help the company experience high occupancy, active leasing and healthy rent levels across a number of properties. Also, the Zacks Consensus Estimate for the third-quarter revenues is currently pinned at $197.8 million — indicating 16.6% increase from the prior-year quarter — which is encouraging.

Further, Duke Realty remains committed toward enhancing the company’s balance-sheet position and is expected to achieve improvement in its leverage metrics. Moreover, although the Zacks Consensus Estimate of FFO per share for the quarter under review remained unchanged at 34 cents over the past two months, the figure denotes a projected year-over-year increase of around 13.3%.

In addition, shares of Duke Realty have appreciated 6.9% in the past six months, outperforming the 5.3% rally of its industry.


Nevertheless, recovery in the industrial market has continued for long and there is intense competition. Also, interest rate-hike issues create hiccups in the market.

Here is what our quantitative model predicts:

Duke Realty has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

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

Earnings ESP: The Earnings ESP for Duke Realty is +2.56%.

Zacks Rank: Duke Realty carries a Zacks Rank #2 (Buy), currently.

A positive Earnings ESP is a meaningful and leading indicator of a likely beat in terms of FFO per share. This, when combined with a favorable Zacks rank, makes us reasonably confident of a positive surprise.

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:

Welltower Inc. (WELL - Free Report) , slated to release third-quarter results on Oct 30, has an Earnings ESP of +1.06% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Public Storage (PSA - Free Report) , scheduled to release earnings on Oct 30, has an Earnings ESP of +0.27% and a Zacks Rank #3.

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

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