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4 REITs Boosting Investor Hopes in Q4 Earnings Season

·7 min read

The current reporting cycle for REITs is in full swing. While the earnings season began in January, several of these companies are yet to release their quarterly numbers, which is usually a distinctive feature of the prolonged fourth quarter.

Investors are busy crunching profit numbers and surprises of REITs that have already reported their fourth-quarter figures so far. However, instead of accumulating stocks later, investing in the ones that are yet to report earnings and are poised for a beat can be far more rewarding. This is because an earnings beat essentially serves as a catalyst, boosts investor confidence in a stock and triggers further price appreciation. This is likely to be reflected in the earnings of Public Storage PSA, Extra Space Storage Inc. EXR, National Storage Affiliates Trust NSA and Pebblebrook Hotel Trust PEB.

Markedly, REITs invest in all types of properties, from residential, industrial, offices, malls to hospitals, hotels and data centers and several others, and underlying asset categories as well as the location of properties play a crucial role in determining their performance. Therefore, delving into the asset fundamentals and markets of each REIT becomes all the more important. Moreover, it is important to figure out whether the pandemic-induced behaviors are resulting in only a short-term impact or long-term structural changes.

For example, the self-storage asset category is need-based and recession-resilient in nature. Additionally, the self-storage industry continues to benefit from favorable demographic changes. The migration and downsizing trend and an increase in the number of people renting homes have escalated the needs of consumers to rent space at a storage facility to park their possessions.

Demand for self-storage spaces has also shot up in a flexible work environment, improving housing market, elevated home sales, remodeling and migration in and out of metropolitan markets, while move-outs have remained low amid the health crisis, resulting in improved year-over-year occupancy trends and an increased average length of stay. This supports revenues because more long-term tenants becoming eligible for rate hikes. Moreover, the lesser need to replace vacating tenants with new tenants is lowering promotional expenses and increasing pricing leverage.

Also, the lodging industry resumed operations and is likely to have gained from the relaxation of pandemic-related regulations, acceleration in vaccine distribution and improving supply-demand fundamentals. There was also a recovery in leisure demand during December and it gained momentum during the year-end holiday week. However, elevated transient cancellations because of the rapid spread of Omicron played a spoilsport.

The Zacks Methodology

Picking the right stock could be difficult unless one knows the proper method. To make the task simple, we rely on the Zacks methodology, combining a Zacks Rank — Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) — and a positive Earnings ESP.

Our proprietary methodology, Earnings ESP, shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. And research shows that for stocks with this combination of rank and ESP, chances of a positive earnings surprise are as high as 70%.

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

Here are four REITs that have the right combination of elements to deliver positive surprises this season. Also, the diversification benefits that real estates offer make them prudent investment choices now.

Public Storage carries a Zacks Rank of 2 and has an Earnings ESP of +0.13% for the to-be-reported quarter, at present. In the last four quarters, Public Storage surpassed the Zacks Consensus Estimate on all occasions, the average beat being 5.16%.

Public Storage Price and EPS Surprise

Public Storage Price and EPS Surprise
Public Storage Price and EPS Surprise

Public Storage price-eps-surprise | Public Storage Quote

In the fourth quarter, PSA is likely to have gained from its solid presence in key cities and high brand value. Moreover, Public Storage has one of the strongest balance sheets in the sector with adequate liquidity to withstand any challenges and bank on expansion opportunities through acquisitions and developments. This is likely to have continued in the fourth quarter.

Public Storage is set to release earnings results on Feb 22.

The Zacks Consensus Estimate for quarterly revenues stands at $912.3 million, calling for a 21.9% year-over-year increase. Apart from this, PSA’s activities during the quarter under review were adequate to gain analysts’ confidence. The Zacks Consensus Estimate for fourth-quarter FFO per share has been revised 2 cents upward to $3.44 in a month. It implies 17.4% year-over-year growth.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Extra Space Storage Inc. currently carries a Zacks Rank of 3 and has an Earnings ESP of + 0.38% for the quarter under review. Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate, the average beat being 5.91%.

Extra Space Storage Inc Price and EPS Surprise

Extra Space Storage Inc Price and EPS Surprise
Extra Space Storage Inc Price and EPS Surprise

Extra Space Storage Inc price-eps-surprise | Extra Space Storage Inc Quote

In the fourth quarter, Extra Space Storage is likely to have benefited from its solid presence in key cities and measures to boost the geographical footprint through accretive acquisitions and third-party management. Extra Space Storage is also likely to have benefited from high brand value and technological advantage and a healthy balance-sheet position.

Extra Space Storage is scheduled to announce fourth-quarter figures on Feb 23.

The Zacks Consensus Estimate of $429.6 million for quarterly revenues suggests a 21.5% increase year over year. The consensus estimate for quarterly FFO per share of $1.86 calls for a 25.7% year-over-year rise.

National Storage Affiliates Trust holds a Zacks Rank #2 and has an Earnings ESP of +0.24%, at present. The company surpassed estimates in each of the preceding four quarters, the average surprise being 6.38%.

National Storage Affiliates Trust Price and EPS Surprise

National Storage Affiliates Trust Price and EPS Surprise
National Storage Affiliates Trust Price and EPS Surprise

National Storage Affiliates Trust price-eps-surprise | National Storage Affiliates Trust Quote

National Storage Affiliates is focused on ownership, operation and acquisition of self-storage facilities situated within the top 100 metropolitan statistical areas throughout the United States and is poised to gain from the healthy fundamentals of its asset category.

National Storage Affiliates will report October-December quarterly figures on Feb 22.

The Zacks Consensus Estimate for quarterly revenues stands at $161.07 million, calling for a 41.15% year-over-year increase. The consensus mark for fourth-quarter FFO per share of 61 cents implies 32.6% year-over-year growth.

Pebblebrook Hotel Trust currently carries a Zacks Rank of 3 and has an Earnings ESP of +15.74% for the quarter under review.

Pebblebrook Hotel Trust Price and EPS Surprise

Pebblebrook Hotel Trust Price and EPS Surprise
Pebblebrook Hotel Trust Price and EPS Surprise

Pebblebrook Hotel Trust price-eps-surprise | Pebblebrook Hotel Trust Quote

This lodging/resorts REIT is poised to benefit from healthy leisure travel throughout December. Per its update on operating trends and portfolio released in January 2022, “December marked the best performing month compared to 2019 since the pandemic began; Total revenue was down just 20% versus December 2019.” PEB credited the company’s better-than-expected performance in December to healthy leisure travel and a persistent retrieval in weekday business group and transient in the first two weeks of the month.

Pebblebrook Hotel Trust is slated to report October-December quarterly figures on Feb 22.

The Zacks Consensus Estimate for fourth-quarter 2021 revenues is currently pegged at $238.5 million, reflecting a significant rebound from the year-ago quarter’s $74.2 million. The consensus mark for funds from operations (FFO) per share is pinned at 7 cents for the quarter.

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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Public Storage (PSA) : Free Stock Analysis Report

Pebblebrook Hotel Trust (PEB) : Free Stock Analysis Report

Extra Space Storage Inc (EXR) : Free Stock Analysis Report

National Storage Affiliates Trust (NSA) : Free Stock Analysis Report

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