The second-quarter earnings season is in full swing and the real estate investment trust (REIT) space is buzzing with activity, with a slew of earnings releases lined up for Jul 29. Among others, Crown Castle International Corp. CCI, Equinix, Inc. EQIX, AvalonBay Communities, Inc. AVB, Duke Realty Corporation DRE, Mid-America Apartment Communities, Inc. MAA will release their quarterly numbers on Wednesday.
The coronavirus pandemic disrupted the economy and the job market during the June-end quarter. While several industries were adversely impacted, there were some which benefited during this period. REITs invest in all types of properties, from residential, industrial, offices, malls to hospitals, hotels and data centers and several others. And underlying asset categories as well as location of properties play a crucial role in determining REITs’ performance. Therefore, not all REITs suffered a setback during the period under discussion. As such, delving into the asset fundamentals and markets of each REIT becomes all the more important.
Let’s analyze the factors that are expected to have played a key role in the above-mentioned REITs’ quarterly performance.
Crown Castle International Corp. is scheduled to release second-quarter 2020 results after the closing bell. Our proven model does not conclusively predict a positive surprise in terms of funds from operations (FFO) per share for Crown Castle this season.
The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here as Crown Castle currently carries a Zacks Rank of 3 and has an Earnings ESP of -0.81%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on two occasions for as many misses, the average negative surprise being 0.81%.
The stay-at-home economy amid the pandemic acted as a catalyst for cell tower REITs. Crown Castle too is expected to have witnessed solid leasing activity, given its unmatched portfolio of towers, small cells and fiber assets. The Zacks Consensus Estimate for the quarterly site rental revenues is pegged at $1.3 billion, indicating a 7.3% year-over-year increase.
However, net revenues from the network services and other segment are pinned at $120 million for the second quarter, suggesting a 50% year-over-year slump. The Zacks Consensus Estimate for the quarterly FFO per share has been unchanged at $1.48 over the past 30 days. It also indicates no change year on year. (Read more: Factors Setting the Tone for Crown Castle's Q2 Earnings)
Crown Castle International Corporation Price and EPS Surprise
Crown Castle International Corporation price-eps-surprise | Crown Castle International Corporation Quote
Equinix, Inc. is set to report quarterly numbers after the bell. It has the right combination of the two key ingredients — an Earnings ESP of +0.12% and Zacks Rank #3 — for increasing the odds of a FFO beat.
The company has a remarkable surprise history, having beaten the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 3.33%.
The Zacks Consensus Estimate for second-quarter revenues is pinned at $1.46 billion, suggesting a 5.5% year-over-year improvement. The consensus estimate of $5.98 for the quarterly FFO per share calls for a year-over-year increase of 1.9%.
The massive work-from-home wave due to the social-distancing measures taken to curb the spread of infection is anticipated to have driven material demand for highly interconnected data-center space from cloud and Internet customers. This sudden incremental network demand, stemming from an increase in remote working, is a positive for the data-center industry and is likely to have benefited Equinix in some of its high-margin product lines during the quarter under review. (Read more: Here's How Equinix Looks Just Ahead of Q2 Earnings)
Equinix, Inc. Price and EPS Surprise
Equinix, Inc. price-eps-surprise | Equinix, Inc. Quote
You can see the complete list of today’s Zacks #1 Rank stocks here.
AvalonBay Communities, Inc. will release second-quarter results after the market closes. Our proven model does not conclusively predict a positive surprise in terms of FFO per share for this residential REIT this season, as AvalonBay currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of 1.11%.
Over the last four quarters, the company surpassed estimates on one occasion and missed in the other three, the average negative beat being 0.33%.
The Zacks Consensus Estimate of $590.7 million for the to-be-reported quarter’s revenues indicates a 2.3% year-over-year increase. However, the consensus estimate of $2.25 for the quarterly FFO per share suggests a year-over year decline of 0.9%.
Notably, the prime leasing season for the U.S. apartment market did not have a favorable start this time. This is because the coronavirus crisis has hurt the economy and substantial job cuts in the beginning of the April-June period affected leasing activity. Amid these, the performance of AvalonBay is likely to have been affected. Nevertheless, the company has high-quality assets located in some of the premium markets of the country. Its properties generally command the highest rents in markets. (Read more: What to Expect From AvalonBay This Earnings Season?)
AvalonBay Communities, Inc. Price and EPS Surprise
AvalonBay Communities, Inc. price-eps-surprise | AvalonBay Communities, Inc. Quote
Duke Realty Corp. is slated to announce earnings result after the bell. Although Duke Realty currently carries a Zacks Rank of 2, its Earnings ESP of 0.00% makes surprise prediction difficult.
Over the last four quarters, the company beat the Zacks Consensus Estimate on one occasion, met estimates in the other two and missed in another, the average negative surprise being 0.71%.
The Zacks Consensus Estimate for second-quarter revenues is pegged at $221.3 million, indicating a year-over-year improvement of 3.8%. The consensus estimate of 37 cents for the period’s FFO per share calls for a year-over-year increase of 2.8%.
Social-distancing measures have particularly prompted order of more goods online. Also, apart from e-retail, companies are making strategic moves to improve their supply-chain efficiencies, propelling demand for logistics infrastructure and efficient distribution networks. Amid these, Duke Realty’s capacity to bank on this favorable trend is likely to have helped the company witness active leasing and healthy rent levels across a number of properties during the June-end quarter. (Read more: What's in the Offing for Duke Realty's Q2 Earnings?)
Duke Realty Corporation Price and EPS Surprise
Duke Realty Corporation price-eps-surprise | Duke Realty Corporation Quote
Mid-America Apartment Communities, Inc. — commonly known as MAA — is scheduled to report earnings numbers after market close. Our proven model does not conclusively predict a positive surprise in terms of FFO per share for this residential REIT this season, as MAA currently carries a Zacks Rank #4 and has an Earnings ESP of 0.00%.
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on three occasions, and missed in the other, the average beat being 1.41%.
The Zacks Consensus Estimate for quarterly revenues is pinned at $410.6 million, suggesting a year-over-year improvement of 0.8%. However, the consensus estimate for the FFO per share of $1.54 indicates a year-over year decline of 1.9%.
Although MAA has a well-diversified portfolio in terms of markets, submarkets, product types and price points across the Southeast and Southwest regions of the United States, the pandemic’s crippling impact on the economy and the job market is likely to have marred demand as well as hurt tenants’ rent-paying capabilities. (Read more: Factors to Impact Mid-America Apartment's Q2 Earnings)
MidAmerica Apartment Communities, Inc. Price and EPS Surprise
MidAmerica Apartment Communities, Inc. price-eps-surprise | MidAmerica Apartment Communities, Inc. Quote
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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