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Alexandria (ARE) Gears Up for Q3 Earnings: What's in Store?

Zacks Equity Research

Alexandria Real Estate Equities Inc. ARE is scheduled to report third-quarter 2019 results on Oct 28, after the market closes. The company’s results will likely reflect year-over-year (y/y) growth in its funds from operations (FFO) per share and revenues.

In the last reported quarter, this Pasadena, CA-based urban office real estate investment trust (REIT), which primarily focuses on collaborative life-science and technology campuses, posted quarterly FFO as adjusted of $1.73 per share, beating the Zacks Consensus Estimate by a whisker. Results reflected decent internal and external growth.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on two occasions for as many misses. It came up with an average positive surprise of 0.30% during this period. The graph below depicts this surprise history:

Alexandria Real Estate Equities, Inc. Price and EPS Surprise
 

Alexandria Real Estate Equities, Inc. Price and EPS Surprise


Alexandria Real Estate Equities, Inc. price-eps-surprise | Alexandria Real Estate Equities, Inc. Quote

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

Notably, strong leasing activity and rental rate growth helped Alexandria to excel in the first half of the year. Given the company’s diversified portfolio of high quality and well-located life-science assets in key life science clusters, this trend will most likely have continued in the third quarter as well.

In fact, it signed a 12-year, full-building headquarter lease at 1165 Eastlake Avenue East by Adaptive Biotechnologies Corporation in the third quarter. The 100,000 rentable square feet (RSF) office/laboratory development is in the heart of its Lake Union life-science cluster in Seattle. 

Moreover, the Zacks Consensus Estimate for third-quarter revenues is pegged at $381.6 million, suggesting y/y growth of 11.6%.

Additionally, high demand for Alexandria’s Class A properties in AAA locations will likely have boosted occupancy in the company’s portfolio in the September-end quarter. This, in turn, is expected to have driven decent rent escalations and positive rent spreads.

However, prior to the third-quarter earnings release, there was lack of any solid catalyst for becoming overtly optimistic about the company’s business activities and prospects. As such, the Zacks Consensus Estimate of FFO per share for the July-September quarter remained unchanged at $1.75, over the past 30 days. Nonetheless, it suggests y/y growth of 5.4%.

Key Developments in Q3

On Sep 30, Alexandria announced the buyout of 3160 Porter Drive, a 92,000 RSF redevelopment project in Stanford Research Park, for $26 million. The transaction highlights the company’s efforts to expand its presence in the greater Stanford innovation cluster.

Notably, Stanford University has selected Alexandria for turning the property into a dynamic innovation center that will promote growth of early- and growth-stage life-science companies. This will aid in the discovery and development of new treatments and cures.

Moreover, the site will be home to Alexandria LaunchLabs at Stanford Research Park, which is likely to open in the first half of 2021. 

Earnings Whispers

Our proven model doesn’t conclusively predict a positive surprise in terms of FFO per share for Alexandria this time around. The combination of a positive Earnings ESP and Zacks Rank #3 (Hold) or better 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.

Earning ESP: Alexandria’s Earnings ESP is 0.00%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

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

Stocks That Warrant a Look

Digital Realty Trust, Inc. DLR, scheduled to release earnings on Oct 29, has an Earnings ESP of +2.61% and carries a Zacks Rank of 3, at present.

Senior Housing Properties Trust SNH, slated to report July-September quarter results on Nov 7, has an Earnings ESP of +3.23% and currently holds a Zacks Rank of 2 (Buy).

Stag Industrial, Inc. STAG, set to release quarterly figures on Oct 30, has an Earnings ESP of +1.1% and carries a Zacks Rank of 3, at present.

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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