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Ladder Capital (LADR) to Report Q4 Earnings: Beat in Store?

Zacks Equity Research

Ladder Capital Corp LADR is scheduled to report fourth-quarter results on Feb 27, after the market closes. The company’s results will likely reflect year-over-year decline in earnings per share (EPS) and net interest income (NII).

In the last reported quarter, this New York City-headquartered commercial real estate finance company focused on mid-market senior secured commercial real estate first mortgage loans, posted core EPS of 59 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 all occasions. It delivered average positive surprise of 29.5% 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

Commercial real estate loan originations remained decent during the fourth quarter. In fact, according to the Mortgage Bankers Association, commercial real estate loan originations were up 14% year over year in the Dec-end quarter.

This uptick was driven by higher loan volumes for healthcare, multi-family and industrial transactions.

Amid this encouraging macro-economic environment, Ladder Capital’s commercial real estate (CRE) financing portfolio is expected to have witnessed significant growth. Notably, the company manages multiple CRE products that offer higher risk-adjusted return opportunity.

Further, the company has strategically allocated capital across its CRE platform, including investments in net leased and other commercial real estate, senior secured loans and commercial mortgage backed securities (CMBS) bonds. 

In the quarter under review, we expect the company to have enjoyed recurring stable cash flows from its real estate portfolio. Additionally, it is monetizing its assets and we anticipate gains from these asset sales to drive core earnings growth in the quarter as well. 

However, higher interest rate is expected to strain the company’s NIM. Also, rate hike during the fourth quarter is likely to have impacted commercial real estate values, thereby, hindering Ladder Capital’s performance. 

The Zacks Consensus Estimate for fourth-quarter 2018 NII is pinned at $78.3 million. This indicates a plunge of 37.9% from the prior-year tally.

Lastly, the company’s activities during the quarter were inadequate to gain analyst confidence. Consequently, the Zacks Consensus Estimate for fourth-quarter 2018 EPS remained unchanged at 43 cents in a month’s time. In addition, it underlines 8.5% year-over-year decline.

Earnings Whispers

Here is what our quantitative model predicts:

Ladder Capital has the right combination of two key ingredients — a positive Earnings ESP and 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: The Earnings ESP for Ladder Capital is +0.94%.

Zacks Rank: Ladder Capital carries a Zacks Rank #3.

A positive Earnings ESP is a meaningful and leading indicator of a likely beat in terms of earnings per share. This, when combined with a favorable Zacks rank, makes us reasonably confident of a positive surprise.

Other Stocks That Warrant a Look

Here are a few stocks in the REIT space 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 (Strong Buy) stocks here.

Hersha Hospitality Trust HT, scheduled to release earnings on Feb 25, has an Earnings ESP of +3.81% and holds a Zacks Rank #2 (Buy).

American Tower Corporation AMT, slated to report quarterly numbers on Feb 27, has an Earnings ESP of +0.29% and carries a Zacks Rank of 3.

Senior Housing Properties Trust SNH, set to release earnings on Mar 1, has an Earnings ESP of +36.36% and carries a Zacks Rank of 2.

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