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Exantas Capital (XAN) to Post Q3 Earnings: What's in Store?

Zacks Equity Research

Exantas Capital Corp. XAN is scheduled to report third-quarter 2019 results on Oct 30, after the market closes. The company’s results will likely reflect year-over-year (y/y) growth in its earnings per share (EPS) and revenues.

In the last reported quarter, this real estate investment trust (REIT), which provides commercial real estate loans and credit investments such as commercial mortgage-backed securities (MBS), posted quarterly core earnings of 28 per share, beating the Zacks Consensus Estimate of 26 cents.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on all occasions. It came up with an average positive surprise of 7.63% during this period. The graph below depicts this surprise history:

Exantas Capital Corp. Price and EPS Surprise

Exantas Capital Corp. Price and EPS Surprise


Exantas Capital Corp. price-eps-surprise | Exantas Capital Corp. Quote

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

Factors to Consider

During the third quarter, mortgage REITs are expected to have witnessed expansion of production pipelines driven by strong origination activity. Lower long-term interest rates and continued strength in commercial real estate (CRE) market is likely to have supported commercial and multi-family mortgage originations during the third quarter. Given the recent mortgage rate declines, refinancing activities have gone up, along with rise in originations.

Given Exantas Capital’s origination capacity, the company is expected to have benefited from this favorable environment in the third quarter.

Notably, the company’s investment strategy involves self-originated, longer duration CRE credit investments. This includes first mortgage loans (also known as whole loans), mezzanine debt as well as commercial MBS (CMBS). 

In fact, investments in CMBS investments offer portfolio diversification and a stable revenue stream. In the third quarter too, the company will likely have enjoyed consistent revenues from CMBS investments.

Notably, the company acquired CRE loans worth $210.8 million in the second quarter. This included the acquisition of a portfolio of floating-rate CRE mortgage loans from C-III Commercial Mortgage LLC for $196.8 million.  

The company is expected to have realized full benefits of this investment in third-quarter 2019. This is expected to have driven the company’s deployment activity and net interest income (NII) for the quarter. This is anticipated to have contributed to the company’s top-line growth.

In fact, the Zacks Consensus Estimate for third-quarter 2019 revenues is pegged at $16.2 million. This indicates y/y growth of 11.6%.

Also, Exantas has maintained a strong liquidity profile facilitating CRE loan originations and investments, and helping the company achieve its goal of full deployment by the end of 2019. A strong balance sheet will likely have driven net investment production, thereby accelerating growth of the company’s core earnings for third-quarter 2019.

Moreover, the Zacks Consensus Estimate for third-quarter EPS is pegged at 30 cents and suggests y/y improvement of 25%.

However, prior to the third-quarter earnings release, there is lack of any solid catalyst for becoming overtly optimistic about the company’s business activities and prospects. As such, the Zacks Consensus Estimate for the July-September quarter’s EPS remained unrevised.

Earnings Whispers

Our proven model doesn’t conclusively predict an earnings beat for Exantas Capital this time around. The combination of a positive Earnings ESP and Zacks Rank #3 (Hold) or better increases the odds of an earnings 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: Exantas Capital’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.

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