We are in another busy week of the current reporting cycle and the real estate investment trust (REIT) space is still buzzing with activity, with a number of earnings releases lined up for Nov 4. Among others, Public Storage PSA, Extra Space Storage Inc. EXR, Host Hotels & Resorts, Inc. HST, Terreno Realty Corporation TRNO, Healthcare Realty Trust Incorporated HR will release their quarterly numbers on Wednesday.
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.
Particularly, in the present situation with macroeconomic woes, social-distancing norms and individual states adopting various policies for lifting the pandemic-related restrictions, understanding the asset fundamentals of REITs has become more relevant. This is because the economic disruption and its impact have widely varied across different property types.
In fact, with concerns about face-to-face contact spurring online purchases, industrial REITs benefited during the quarter in discussion, though lodging REITs, which have the highest potential exposure to COVID-19 due to the face-to-face interactions, felt the brunt as business and vacation travel have been widely affected.
Healthcare REITs too have had their share of troubles in the third quarter, with record-low occupancy and high instances of coronavirus cases at senior housing facilities denting companies’ performances. However, life-science assets have been gaining, while medical office buildings fundamentals are recovering.
Let’s analyze the factors that are expected to have played key roles in the above-mentioned REITs’ quarterly performance.
Public Storage is set to report third-quarter 2020 results after the bell. Our proven model does not conclusively predict a positive surprise in terms of funds from operations (FFO) per share for this self-storage REIT 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 Public Storage currently carries a Zacks Rank of 3 and has an Earnings ESP of -0.56%. 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 met estimates on one occasion, and missed in the other three, the average negative surprise being 0.86%.
The Zacks Consensus Estimate for quarterly revenues is currently pinned at $723 million, suggesting a 0.9% year-over-year decline. The consensus estimate of $2.60 for the quarterly FFO per share calls for a 4.8% year-over-year fall.
Public Storage is likely to have benefited from its solid presence in key cities and high brand value during the third quarter. In addition, the company has been capitalizing on growth opportunities. Moreover, Public Storage has one of the strongest balance sheets in the sector, which is likely to have been healthy during the quarter under review as well. However, there is a substantial fall in demand for self-storage spaces amid the pandemic. This is reducing move-in volumes despite lower move-in rental rates. Furthermore, stress on customers’ financial capacity will likely result in rent-collection issues. (Read more: What's in the Cards for Public Storage's Q3 Earnings?)
Public Storage Price and EPS Surprise
Public Storage price-eps-surprise | Public Storage Quote
Extra Space Storage is scheduled to release quarterly numbers after market close. It has the right combination of the two key ingredients — an Earnings ESP of +0.53% and Zacks Rank #2 — for increasing the odds of a FFO beat.
Over the preceding four quarters, the company surpassed the Zacks Consensus Estimate on three occasions and met in the other, the average beat being 2.74%.
The Zacks Consensus Estimate of $330.6 million for quarterly revenues calls for a 2% decline year on year. The consensus mark of $1.23 for the soon-to-be-reported quarter’s FFO per share suggests a 0.81% year-over-year decline.
Extra Space Storage is likely to have benefited from its solid presence in key cities and measures to boost the company’s geographical footprint through accretive acquisitions and third-party management. Moreover, the self-storage asset category is need-based and recession-resilient in nature. However, the coronavirus pandemic has been wreaking havoc and the self-storage market too has not been immune to its crippling impact. (Read more: Factors to Impact Extra Space Storage's Q3 Earnings)
Extra Space Storage Inc Price and EPS Surprise
Extra Space Storage Inc price-eps-surprise | Extra Space Storage Inc Quote
Host Hotels & Resorts, Inc. will announce third-quarter figures after the bell. Our proven model does not conclusively predict a positive surprise in terms of FFO per share for this lodging REIT this season, as Host Hotels currently carries a Zacks Rank #5 (Strong Sell) and has an Earnings ESP of 6.16%.
Over the last four quarters, the company outpaced estimates on two occasions and missed in one and met in another, the average negative surprise being 2.3%.
The Zacks Consensus Estimate for Host Hotels’ third-quarter revenues is presently pinned at $230.6 million, suggesting an 81.7% year-over-year slump. The consensus estimate is negative 21 cents for the quarterly FFO per share, as against the year-ago period’s 35 cents.
Limited leisure and business travel as well as reduction in event bookings, which are typically demand drivers, are likely to have significantly thwarted Host Hotel’s performance during the September-end quarter. (Read more: What's in the Offing for Host Hotels' Q3 Earnings?)
Host Hotels Resorts, Inc. Price and EPS Surprise
Host Hotels Resorts, Inc. price-eps-surprise | Host Hotels Resorts, Inc. Quote
You can see the complete list of today’s Zacks #1 Rank stocks here.
Terreno Realty Corporation is likely to announce earnings results around Wednesday. Although Terreno Realty currently carries a Zacks Rank of 2, its Earnings ESP of 0.00% makes surprise prediction difficult.
Over the preceding four quarters, the company beat the Zacks Consensus Estimate on one occasion, met estimates in the other and missed in another two, the average negative beat being 0.68%.
Despite the macroeconomic slowdown, this industrial REIT is anticipated to have gained from the healthy fundamentals of the industrial real estate market. The Zacks Consensus Estimate for third-quarter revenues is pegged at nearly $46 million, calling for a 5.9% increase year on year. The consensus estimate for quarterly FFO per share is pinned at 36 cents, in line with the prior-year period.
Terreno Realty Corporation Price and EPS Surprise
Terreno Realty Corporation price-eps-surprise | Terreno Realty Corporation Quote
Healthcare Realty Trust is scheduled to report quarterly numbers after market close. Our proven model does not predict a beat in terms of FFO per share for the company this season, as it currently carries a Zacks Rank of 3 and has an Earnings ESP of -1.27%.
Over the trailing four quarters, the company beat the Zacks Consensus Estimate on two occasions and met in the other two periods, the average positive surprise being 1.25%.
The Zacks Consensus Estimate for third-quarter revenues is $122.2 million, indicating a 2% increase year on year. The consensus estimate for the FFO per share is pegged at 40 cents, in line with the prior-year period.
Healthcare Realty Trust Incorporated Price and EPS Surprise
Healthcare Realty Trust Incorporated price-eps-surprise | Healthcare Realty Trust Incorporated 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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