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Key Factors to Impact Arbor Realty's (ABR) Q3 Earnings

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Arbor Realty Trust (ABR - Free Report) is scheduled to report third-quarter 2019 results on Nov 1, before the market opens. The company’s performance will likely reflect a year-over-year increase in interest income, while its adjusted funds from operations (AFFO) per share might display a decline.

In the last reported quarter, this New York-headquartered real estate investment trust (REIT), which primarily focuses on originating and servicing loans for multi-family, seniors housing, healthcare, and other commercial real estate assets, posted AFFO of 33 cents, surpassing the Zacks Consensus Estimate by a nickel. Results reflected increase in interest income.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on all occasions, the average beat being 12.6%. The graph below depicts this surprise history:

Arbor Realty Trust Price and EPS Surprise

Arbor Realty Trust Price and EPS Surprise

Arbor Realty Trust price-eps-surprise | Arbor Realty Trust Quote

Arbor Realty is likely to have gained from its solid footprint and proven ability to grow market share in the stable Agency lending segment. In fact, a larger chunk of the company’s agency transaction volume is in small balance multi-family loans, which are excluded from agency caps.

Notably, multi-family is an attractive asset class with long-term secular demand driven by reduced home ownership rates, availability of GSE financing and highly-liquid asset class with stable demand through economic cycles.

Amid these, the company’s Agency business is expected to have closed significant loan originations and generated strong margins on loan sales.

Moreover, growth in its loan business is anticipated to have continued, backed by market demand, its proprietary relationships as well as the company’s expertise in structured loans. The company is also progressing well in developing a single-family residential platform, providing additional bridge and permanent lending products.

This further diversifies the company’s income streams and lending platforms. The REIT is also likely to have benefited from its improved funding sources with favorable pricing, increasing capacity and maturities extension of existing facilities.

Importantly, for third-quarter 2019, the Zacks Consensus Estimate for the company’s interest income is pegged at $85.4 million, suggesting an impressive jump of 26.5% on a year-over-year basis.

However, high competition in the lending market might have resulted in aggressive pricing, thereby, impacting Arbor Realty’s margins and bottom-line growth.

Hence, there is lack of any solid catalyst prior to the third-quarter earnings release. As such, the Zacks Consensus Estimate of AFFO for the quarter remained unchanged at 33 cents, over the past month. The figure also reflects a projected decline of 10.8% year over year.

Here is what our quantitative model predicts:

Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Arbor Realty this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Arbor Realty carries a Zacks Rank of 3, its Earnings ESP of 0.00% makes surprise prediction difficult.

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:

Paramount Group, Inc. (PGRE - Free Report) , scheduled to release earnings on Nov 6, has an Earnings ESP of +1.41% and currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Realty Income Corp. (O - Free Report) , slated to report third-quarter results on Nov 4, has an Earnings ESP of +0.33% and holds a Zacks Rank of 2.

Senior Housing Properties Trust , set to release quarterly numbers on Nov 7, has an Earnings ESP of +3.23% and carries a Zacks Rank of 2, currently.

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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