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Key Factors to Impact Arbor Realty's (ABR) Q4 Earnings

Zacks Equity Research

Arbor Realty Trust ABR is scheduled to report fourth-quarter 2018 results on Feb 15, before the market opens. The company’s results will likely reflect year-over-year growth in its adjusted funds from operations (AFFO) and interest income.

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 37 cents, surpassing the Zacks Consensus Estimate by a whisker. Results benefited from growth in loan originations and servicing portfolio in the company’s Agency business.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate in all occasions, average beat being 15.2%. The graph below depicts this surprise history:

Arbor Realty Trust Price and EPS Surprise

Arbor Realty Trust Price and EPS Surprise | Arbor Realty Trust Quote

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

Factors to Consider

According to a report by Arbor Realty, lending activity for new multi-family loans picked up pace in the fourth quarter, resulting in year-over-year growth of 3.7%. In fact, loan origination volumes (for loans with original balances between $1 million and $5 million) reached $51.7 billion in 2018. Notably, escalating demand for refinancing, stemming from the sector’s high indebtedness likely aided this level of lending activity.

Amid these, we expect the company’s Agency business to have closed significant loan originations that will help enjoy strong margins. Further, its servicing portfolio enjoys predictable annuity income.

Also, during the quarter, Arbor Realty closed three single-family rental portfolio refinancing deals amounting to $66.4 million under the Freddie Mac Single-Family Rental pilot. These efforts have enabled the company to strengthen its position in the single-family rental market.

Importantly, for fourth-quarter 2018, the Zacks Consensus Estimate for the company’s interest income is pegged at $69.2 million and represents an impressive jump of 50.3% on a year-over-year basis.

Additionally, the company raised fresh capital during the quarter by issuing common shares in a public offering. This transaction generated additional capital and the company intends to use the proceeds in business-related investments.

However, high competition in the lending market is likely to result in aggressive pricing, thereby, impacting Arbor Realty’s margins and bottom-line growth.

Hence, there is lack of any solid catalyst prior to the fourth-quarter earnings release. As such, the Zacks Consensus Estimate of AFFO for the to-be-reported quarter remained unchanged at 27 cents, over the past month. Nonetheless, AFFO is projected to be up 8% year over year.

Earnings Whispers

Our proven model does not conclusively show that Arbor Realty is likely to beat estimates this quarter. 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. 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.

Earning ESP: Arbor Realty’s Earnings ESP is 0.00%.

Zacks Rank: The company currently carries a Zacks Rank of 2, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of the earnings beat.

Stocks That Warrant a Look

Hersha Hospitality Trust HT, scheduled to release earnings on Feb 25, has an Earnings ESP of +3.81% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sabra Health Care REIT, Inc. SBRA, slated to release fourth-quarter results on Feb 24, has an Earnings ESP of +5.49% and a Zacks Rank of 3.

American Tower Corporation AMT, set to release earnings on Feb 27, has an Earnings ESP of +0.29% and carries a Zacks Rank of 3.

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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