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What's in the Cards for Alexandria (ARE) This Earnings Season?

Zacks Equity Research

Alexandria Real Estate Equities Inc. ARE is scheduled to report second-quarter results on Jul 29, after the market closes. The company’s results will likely reflect year-over-year growth in its funds from operations (FFO) per share and revenues.

In the last reported quarter, this Pasadena, CA-based urban office real estate investment trust (REIT), which primarily focuses on collaborative life-science and technology campuses, had posted quarterly FFO as adjusted of $1.71 per share, beating the Zacks Consensus Estimate of $1.68. Results reflected decent internal and external growth.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate in one occasion, missed in another two and met in the other. It came up with an average positive surprise of 0.15% during this period. The graph below depicts this surprise history:

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

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

Factors to Consider

Alexandria kick started the second quarter on a bright note by opening Phase 1 of Alexandria Center for AgTech – Research Triangle in April, marking its latest agricultural technology (agtech) business initiative.

The development is the only integrated, multi-tenant greenhouse campus that offers amenity-rich agtech R&D in the United States. As the property goes operational, it is expected to contribute to the company’s second-quarter 2019 revenues and net operating income (NOI). 

Further, at this agtech cluster, Alexandria launched two proprietary platforms — Alexandria LaunchLabs — AgTech and agtech-focused Alexandria Seed Capital platform that expands its Alexandria LaunchLabs initiative. Notably, Alexandria LaunchLabs provides seed-stage financing to life-science companies, and last January, the company launched Alexandria Seed Capital Platform, extending the funding model.

Under this platform, Alexandria made seed-funding investment in Cambridge-based Holobiome, Inc., in April 2019. Amid surge in global-venture capital funding, such investments are appropriate and will likely be conducive to the company’s earnings.

Additionally, high demand for Alexandria’s Class A properties in AAA locations is expected to boost occupancy in the company’s portfolio. In fact, 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 have improved Alexandria’s second-quarter revenues. In fact, the Zacks Consensus Estimate for the same is pegged at $365.3 million and reflects a year-over-year jump of 12.4%.

Further, in June, Alexandria closed a public offering of 4,427,500 shares of common stock at $145.00 per share. Although this offering is in connection to forward sale agreements,where the company will not receive any proceeds through forward sales in the initial phase, it enhances Alexandria’s financial flexibility. The company’s improved credit profile and strong liquidity position are also anticipated to have supported its growth pursuits during the quarter.  

However, prior to the first-quarter earnings release, there was lack of any solid catalyst for becoming overtly optimistic about the company’s business activities and prospects. As such, the Zacks Consensus Estimate of FFO per share for the April-June quarter remained unchanged at $1.72, over the past 30 days. Nonetheless, it suggests year-over-year growth of 4.9%.

Earnings Whispers

Our proven model does not conclusively show that Alexandria 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: Alexandria’s Earnings ESP is 0.00%.

Zacks Rank: The company currently carries a Zacks Rank of 2, 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

Boston Properties, Inc. BXP, scheduled to release earnings on Jul 30, has an Earnings ESP of +0.06% and carries a Zacks Rank #3, at present.

Corporate Office Properties Trust OFC, slated to report quarterly figures on Jul 29, has an Earnings ESP of +0.66% and carries a Zacks Rank of 3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Healthcare Realty Trust Incorporated HR set to release June-end quarter results on Jul 30, has an Earnings ESP of +0.72% and currently holds a Zacks Rank #3.

 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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