Back to top

What's in Store for W. P. Carey (WPC) This Earnings Season?

Read MoreHide Full Article

W. P. Carey Inc. (WPC - Free Report) is set to report third-quarter 2018 results before the market opens on Nov 2. Both its revenues and funds from operations (FFO) are anticipated to reflect year-over-year growth.

In the last reported quarter, this New York-based net-lease REIT delivered a positive surprise of 4.76% with respect to FFO per share.

The company has a decent surprise history. It surpassed estimates in each of the trailing four quarters, the average positive surprise being 11.85%. The graph below depicts the surprise history of the company:

W.P. Carey Inc. Price and EPS Surprise


Let’s see how things have shaped up for this announcement.

Factors to Consider

W. P. Carey is a diversified net lease REIT having a portfolio of critical corporate real estate which it leases back to creditworthy tenants on a long-term basis with built-in rent escalators. The company particularly invests in high-quality single-tenant industrial, warehouse, office and retail properties.

The properties are located mainly in the United States, and Northern and Western Europe. The company boasts portfolio diversification by tenant, property type, geographic location and tenant industry.

Recently, W. P. Carey announced the completion of its $5.9-billion merger with one of its managed funds, Corporate Property Associates 17 – Global Incorporated (CPA:17). The move is expected to help the company improve its earnings quality, aid in simplification of its business, enhance portfolio metrics, specifically, weighted average lease term, and tenant and industry diversification.

In the third quarter, W. P. Carey is anticipated to have registered healthy lease revenues, backed by its high-quality portfolio. The company’s portfolio enjoys high occupancy and growing rent. In addition, the company is likely to have experienced an increase in its weighted average lease term of its portfolio.

The company also focuses on capitalizing on existing tenant relationships through accretive expansions, renovations and follow-on deals. The company has expertise in repositioning its assets through re-leasing, restructuring and strategic disposition. It also has an active acquisition pipeline. These efforts are likely to have backed its third-quarter performance.

Additionally, the company is anticipated to benefit from continued emphasis on streamlining its cost structure. Further, its investment-grade balance sheet with the opportunity to access multiple forms of capital are likely to have supported its growth endeavors in the Sep-end quarter.

Amid these, the company’s third-quarter revenues are pinned at $211.1 million, indicating a 19.6% increase from the prior-year quarter. Also, the Zacks Consensus Estimate for FFO per share for the quarter under review is $1.43, reflecting a 4.4% increase year over year.

However, W. P. Carey’s activities during the quarter were insufficient to secure analyst confidence. Consequently, the consensus estimate for third-quarter FFO per share remained unrevised at $1.43 in a month’s time.

Nonetheless, there is stiff competition for investments, both domestically and internationally. Further, one-time structuring revenues may decline, with new investments being now limited to capital recycling within its existing funds.

Earnings Whispers

Our proven model does not conclusively show that W. P. Carey is likely to 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.

Earnings ESP: The Earnings ESP for W. P. Carey is 0.00%.

Zacks Rank: W. P. Carey’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of a positive surprise.

Stocks That Warrant a Look

Here are a few other 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:

Physicians Realty Trust (DOC - Free Report) , scheduled to release earnings on Nov 2, has an Earnings ESP of +2.44% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Omega Healthcare Investors, Inc. (OHI - Free Report) , slated to release third-quarter results on Nov 5, has an Earnings ESP of +0.66% and a Zacks Rank of 3.

DiamondRock Hospitality Company (DRH - Free Report) , set to report its quarterly numbers on Nov 5, has an Earnings ESP of +5.00% and a Zacks Rank #3.

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