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Ladder Capital (LADR) to Post Q3 Earnings: What Lies Ahead?

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Ladder Capital Corp LADR is scheduled to report third-quarter results on Nov 1, after the market closes. The company’s results will likely reflect year-over-year growth in earnings per share (EPS) and net interest income (NII).

In the last reported quarter, this New York City-headquartered mortgage real estate investment trust (REIT), which primarily focuses on originating and investing in commercial real estate first mortgage loans, posted core EPS of 45 cents surpassing the Zacks Consensus Estimate of 40 cents. Results also reflected year-over-year growth in interest income. 

Over the trailing four quarters, the company outpaced the Zacks Consensus Estimate in three occasions and met in the other. It delivered an average positive surprise of 17.61% during this period. The graph below depicts this surprise history:

Ladder Capital Corp Price and EPS Surprise
 

Ladder Capital Corp Price and EPS Surprise | Ladder Capital Corp Quote

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

Factors at Play

Ladder Capital’s credit real estate (CRE) investment portfolio is well diversified across CRE loans, equity and commercial mortgage-backed securities.  In fact, majority of the company’s capital is allocated to senior secured investments. Amid rising interest rate scenario and challenging global economic environment, this allocation to safer assets will likely reduce volatility in the company’s earnings.  

Further, a significant portion of the company’s earnings are generated through recurring net interest margins (NIM) & CRE equity net cash flows. In the quarter under review as well, this will likely provide cushion to the company’s earnings.

The Zacks Consensus Estimate for third-quarter 2018 revenues is pinned at $72.17 million. This indicates growth of 4.14% from the prior-year tally of $69.30 million.

However, yield-curve flattening and escalating trade-war tensions have spiked concerns over global economies and acted as dampeners in the Sep-end quarter. Further, higher interest rate is expected to strain the company’s NIM. In addition, as capital from loans maturing in the third quarter will be rotated into new investments, we anticipate the company to witness lower asset yields.

Also, we believe the company prioritizes risk management over incremental returns. Hence, robust returns are expected to remain elusive in the near term.

Additionally, the Zacks Consensus Estimate of EPS for the to-be-reported quarter has been revised downward by a cent to 40 cents over the past week, reflecting analyst bearish sentiment prior to the company’s third-quarter earnings release.

Earnings Whispers

Our proven model does not conclusively show that Ladder Capital 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: Ladder Capital’s Earnings ESP is -1.81%.

Zacks Rank: The company currently flaunts a Zacks Rank of 1, 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

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

Granite Point Mortgage Trust Inc. GPMT, slated to report third-quarter results on Nov 5, has an Earnings ESP of +1.7% and holds a Zacks Rank of 3.

Hannon Armstrong Sustainable Infrastructure Capital, Inc HASI, set to release its Jul-Sep quarter figures on Nov 7, has an Earnings ESP of +7.69% and a Zacks Rank of 3.

Two Harbors Investments Corp TWO, scheduled to report quarterly numbers on Nov 6, has an Earnings ESP of +0.7% and carries a Zacks Rank of 2.

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Ladder Capital Corp (LADR) : Free Stock Analysis Report
 
Hannon Armstrong Sustainable Infrastructure Capital, Inc. (HASI) : Free Stock Analysis Report
 
Two Harbors Investments Corp (TWO) : Free Stock Analysis Report
 
Granite Point Mortgage Trust Inc. (GPMT) : Free Stock Analysis Report
 
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