Key Factors to Impact Plymouth Industrial (PLYM) Q4 Earnings

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Plymouth Industrial REIT, Inc. PLYM is slated to report fourth-quarter and full-year 2018 earnings on Mar 8, before the opening bell. The company’s results will likely display year-over-year growth in funds from operations (FFO) per share and revenues.

In the last reported quarter, this industrial real estate investment trust (REIT) delivered a positive surprise of 7.69% in terms of FFO per share. The company also witnessed solid top-line growth in the period.

Over the preceding four reported quarters, Plymouth’s FFO per share surpassed estimates on three occasions and missed in the other quarter, the average beat being 17.55%. This is depicted in the graph below:

PLYMOUTH IND RE Price and EPS Surprise

PLYMOUTH IND RE Price and EPS Surprise | PLYMOUTH IND RE Quote

 

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

Factors at Play

This Boston-based industrial REIT focuses on buyout and operations of single and multi-tenant industrial properties positioned in secondary and select primary markets through the United States.

The company is likely to post an encouraging performance in the to-be-reported quarter as the industrial real estate market is gaining strength amid solid U.S. economy, job-market gains, thriving e-commerce market, high consumption levels and a robust consumer confidence. Demand for warehouses, distribution centers and other industrial property remains strong and consistently surpasses supply levels.

Per a study by the commercial real estate services firm — CBRE Group CBRE — availability of the U.S. industrial market declined for 34 straight quarters and came in at 7% during fourth-quarter 2018, denoting the lowest point since 2000. Moreover, demand for warehouses exceeded the delivery of newly constructed supply by around 6 million square feet, according to the report. Additionally, with demand outpacing new supply, net asking rents inched up 2.2% in the fourth quarter to $7.37 per square feet, thereby marking the highest level since 1989, going by a CBRE report.

Amid these, Plymouth is focused on driving revenues, increasing net operating income (NOI) and cash flows on the back of strategic acquisitions and investments, active asset management, prudent property re-positioning and disciplined capital deployment.

During the fourth quarter, the company completed the Jacksonville portfolio acquisition worth $97 million, which included three business parks totaling 20 buildings and 1,133,516 square feet of institutional quality light industrial and flex assets. Situated in the attractive Southside submarket of Jacksonville, the properties are currently 96% leased to 40 tenants including Comcast CMCSA, Veritiv, Cardinal Health, The Home Depot HD, Johnson Controls et al.

Moreover, Plymouth completed the previously announced strategic investment by an affiliate of Madison International Realty Holdings, LLC, aggregating $75 million. The proceeds from the Madison investment were largely utilized to fund portfolio buyout, pay off the $31.2 million term loan and support a $5-million common stock repurchase program.

Additionally, on Oct 15, 2018, Plymouth accomplished the purchase of a 1.1 million-square-foot multi-tenant Class B industrial property in the greater Cincinnati, OH market for $24.8 million. The building is 92% leased and projected to provide an initial yield of 8.5%.

The Zacks Consensus Estimate for fourth-quarter revenues is currently pegged at $13.3 million, indicating a whopping 58.2% surge year over year, which is impressive. Also, the consensus estimate for fourth-quarter FFO per share stands at 34 cents, reflecting a substantial year-over-year increase.

Moreover, for 2018, the company projected total revenues for 2018 in the range of 47.4-$47.6 million and NOI, in the 30.3-30.5 million band.

However, there has been a steady recovery in the industrial market for long and a whole lot of new buildings are becoming available in the market, leading to higher supply and lesser scope for rent and occupancy growth. Additionally, any protectionist trade policies will leave an adverse impact on economic growth and the company’s business over the long term.

The Zacks Consensus Estimate for fourth-quarter FFO per share is flat at 34 cents over the past two months.

Here is what our quantitative model predicts:

Plymouth does not have the right combination of the following two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Earnings ESP: Plymouth has an Earnings ESP of 0.00%.

Zacks Rank: Plymouth currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Although a favorable Zacks Rank increases the predictive power of ESP, we need a positive ESP in the stock’s combination to be confident about an earnings surprise in terms of FFO per share.

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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