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REITs Queued for Q2 Earnings on Jul 29: ARE, VNO, SBAC & More

Moumita C. Chattopadhyay

The real estate investment trust (REIT) space is buzzing with activity, with the current reporting cycle in full swing. Notably, Jul 29 will mark the beginning of another busy week, with a deluge of earnings releases lined up. Among others, Alexandria Real Estate Equities ARE, Vornado Realty Trust VNO, SBA Communications Corporation SBAC, Brixmor Property Group BRX and American Homes 4 Rent AMH will release their quarterly numbers on Monday.

Of late, this rate-sensitive industry has been grabbing attention as the Fed chairman Jerome Powell and other officials of the regulatory body have been dropping hints about more aggressive policy easing. However, apart from rates, underlying asset categories and the location of properties play a crucial role in determining REITs’ performance. Therefore, delving into the asset fundamentals becomes all the more important.

Per a study by the commercial real estate services firm — CBRE Group — backed by rising demand and strong leasing activity, the second-quarter office vacancy rate shrunk 10 basis points (bps) to 12.2%, denoting its lowest level in 18 years. Average gross asking rent climbed 5.1%, year on year, in the second quarter to $34.28 per square feet, keeping up with the trend of accelerating rent growth.

Moreover, the latest figures from real estate technology and analytics firm RealPage, Inc. suggest that during the current year’s prime leasing period, the U.S. apartment rental market was able to capitalize on stellar demand for rental units. Occupancy reached 95.8% during the second quarter, up from the prior-year quarter’s 95.4% despite steady delivery of new units. Additionally, the market has achieved a 3% increase in rents from the prior-year level, attaining an average of $1,390 per month.

Though the retail real estate market is undergoing structural changes, recent data from Reis indicates stability in the vacancy rate and rent levels. It also suggests that the sector has been able to weather such challenges to some extent as the retail landlords continued with their transformation initiatives while there is minimal construction activity in the pipeline.

In the second quarter, the vacancy rate of neighborhood and community shopping center shrunk 10 basis points sequentially to 10.1% — denoting the first decline since first-quarter 2016. The Regional Mall vacancy rate remained flat at 9.3% in the second quarter. Also, both, national average asking rent and effective rent, which nets out landlord concessions, inched up 0.4% sequentially and 1.7% from the year-ago quarter.

These apart, per the latest Earnings Preview, overall earnings for the finance sector, of which REITs are part, will likely be up 8.4% year over year on 6.7% higher revenues, in second-quarter 2019.

Let’s take a look at what can be expected from the five above-mentioned REITs’ second-quarter 2019 earnings.

Alexandria Real Estate Equities is set to report results after the market closes. The REIT is focused on the ownership, operation, management, selective redevelopment, development and acquisition of life-science properties. The Zacks Consensus Estimate for funds from operations (FFO) per share is pinned at $1.72, indicating growth of 4.9% year over year. Also, the consensus estimate for revenues of $365.3 million suggests a 12.4% rise.

With a Zacks Rank #2 (Buy) and Earnings ESP of 0.00%, chances of the company surpassing the Zacks Consensus Estimate in the June-end quarter appears low.

(You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.)

Solid demand from life-science and tech tenants as well as strategic location of its clusters have likely enabled the company to enjoy healthy rent escalations and leasing activity at positive rent spreads. This will likely boost Alexandria’s second-quarter revenues. The company’s improved credit profile and strong liquidity position are also anticipated to support its growth pursuits during the quarter. (Read: What's in the Cards for Alexandria This Earnings Season?)

Alexandria Real Estate Equities, Inc. Price and EPS Surprise
 

Alexandria Real Estate Equities, Inc. Price and EPS Surprise

Alexandria Real Estate Equities, Inc. price-eps-surprise | Alexandria Real Estate Equities, Inc. Quote

Vornado Realty Trust, scheduled to announce results after market close, has a concentration of high-quality assets, and strategic focus on expanding its market share in New York City office and Manhattan street retail. The Zacks Consensus Estimate for revenues of $542.6 million indicates an uptick of 0.1%. However, the consensus estimate for FFO per share is 91 cents, which is nearly 17.3% lower than the year-ago quarter figure.

With a Zacks Rank of 3 and Earnings ESP of -3.78%, the chances of this REIT beating the Zacks Consensus Estimate in the to-be-reported quarter are low.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Amid stable economic environment and job-market growth, demand for Vornado’s New York City office portfolio is likely to remain high. However, Vornado’s properties too will likely be affected by a number of store closures at the priciest retail corridors that continue to torment the retail industry. During the quarter under review, British apparel brand, Topshop, joined a growing list of retailers that announced store closures, shutting doors at all of its 11 U.S. stores. The apparel chain is a tenant at Vornado’s 608 Fifth Avenue. Hence, the company will record a non-cash impairment losses and related write-offs, substantially all on 608 Fifth Avenue, reducing FFO per share by 38 cents per share. (Read: Factors Setting the Tone for Vornado in Q2 Earnings)

Vornado Realty Trust Price and EPS Surprise
 

Vornado Realty Trust Price and EPS Surprise

Vornado Realty Trust price-eps-surprise | Vornado Realty Trust Quote


SBA Communications Corporation is slated to release its quarterly numbers after the closing bell. The company is predicted to witness growth in FFO per share and revenues. The consensus estimate for revenues of $491.5 million calls for growth of 7.7% year over year. Further, the consensus estimate for FFO per share is $2.03, 10.9% higher than the prior-year reported figure.

While SBA Communications has a favorable Zacks Rank of 3, the Earnings ESP of 0.00% lowers chances of the communications tower operator beating the Zacks Consensus Estimate in the to-be-reported quarter.

SBA Communications is anticipated to report higher year-over-year revenues in both the operating segments, backed by solid domestic and international site leasing activity, excellent services, and cost-control initiatives. It continues to focus on finding accretive tower opportunities to create additional shareholder value. However, the company remains susceptible to risk of earnings volatility due to unfavorable foreign-currency movements due to its geographically diverse scale of operations. (Read: SBA Communications to Report Q2 Earnings: What's Up?)

SBA Communications Corporation Price and EPS Surprise
 

SBA Communications Corporation Price and EPS Surprise

SBA Communications Corporation price-eps-surprise | SBA Communications Corporation Quote

Residential REIT American Homes 4 Rent is focused on acquiring, renovating, leasing, and operating single-family homes as rental properties. The company is projected to record an increase in revenues and flat FFO per share compared to the prior-year quarter.

The Zacks Consensus Estimate for revenues of $279.6 million indicates a rise of 5.7% year over year. However, consensus estimate for FFO per share will likely remain unchanged at 27 cents. With a Zacks Rank #3 and Earnings ESP of 0.00%, chances of American Homes 4 Rent beating the Zacks Consensus Estimate are low.

Over the preceding four quarters, the REIT has surpassed the Zacks Consensus Estimate on one occasion and met estimates in the other three.

American Homes 4 Rent Price and EPS Surprise
 

American Homes 4 Rent Price and EPS Surprise

American Homes 4 Rent price-eps-surprise | American Homes 4 Rent Quote


Retail REIT Brixmor Property Group, which owns and operates a national portfolio of open-air shopping centers, will likely register decline in both FFO per share and revenues in the quarter to be reported.

The Zacks Consensus Estimate for revenues of $288.5 million suggests a year-over-year drop of 7.8%. The consensus estimate for FFO per share of 47 cents indicates a slip of 7.8% as well. Although this REIT has a Zacks Rank of 2, its Earnings ESP of 0.00% lowers chances of a positive surprise this quarter.

It has a mixed surprise history. The company outpaced the Zacks Consensus Estimate twice for as many misses, over the last four quarters.

Brixmor Property Group Inc. Price and EPS Surprise
 

Brixmor Property Group Inc. Price and EPS Surprise

Brixmor Property Group Inc. price-eps-surprise | Brixmor Property Group Inc. Quote


Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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SBA Communications Corporation (SBAC) : Free Stock Analysis Report
 
Brixmor Property Group Inc. (BRX) : Free Stock Analysis Report
 
American Homes 4 Rent (AMH) : Free Stock Analysis Report
 
Alexandria Real Estate Equities, Inc. (ARE) : Free Stock Analysis Report
 
Vornado Realty Trust (VNO) : Free Stock Analysis Report
 
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