What's in the Offing for Duke Realty's (DRE) Q1 Earnings?

Duke Realty Corp. DRE is scheduled to report first-quarter 2020 earnings on Apr 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 industrial real estate investment trust’s (REIT) core FFO per share of 38 cents came in line with the Zacks Consensus Estimate. Results indicated overall improved operations as well as increased investments in new industrial properties.

Over the preceding four quarters, the company beat the Zacks Consensus Estimate on two occasions and met estimates in the other two, the average beat being 1.5%. The graph below depicts this surprise history:

Let’s see how things have shaped up prior the first-quarter earnings release.

Factors at Play

The industrial real estate asset category continues to play a pivotal role in a rising e-commerce market, transforming the way how consumers shop and receive their goods. Services like same-day delivery are gaining traction and last-mile properties in high-income urban areas have been witnessing solid pricing, occupancy and growth in rentals.

Also, apart from e-retail, companies are taking the omni-channel plunge and making strategic moves to boost their supply-chain efficiencies, thereby propelling demand for logistics infrastructure and efficient distribution networks.This is encouraging industrial REITs to employ sophisticated technologies at their logistics centers to achieve efficiency in trans-shipment and delivery processes.

Though the coronavirus pandemic resulted in a choppy situation in March, it needs to be noted that the industrial real estate category seems to be one of the most resilient ones during the crisis.

As for Duke Realty, its solid 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 March-end quarter. This domestic pure-play industrial REIT focuses on growing its portfolio through buyouts and development, on a speculative and build-to-suit basis, in markets with stellar growth potential.

Its diversified portfolio of more than 550 logistics facilities positioned from coastal ports to thriving inland hubs is likely to have witnessed solid demand from e-commerce and traditional distribution customers for the company’s industrial properties.

The Zacks Consensus Estimate for first-quarter revenues is pegged at $219.5 million, indicating a year-over-year improvement of 4.6%.

Nonetheless, the estimate for first-quarter general contractor and service fee revenues is $12 million, indicating a decline from the prior-quarter tally of $13.1 million.

Moreover, recovery in the industrial market has continued for long and a whole lot of new buildings are available in the market, leading to higher supply and lesser scope for rent and occupancy growth. Additionally, there were concerns about the global economy and supply-chain disruptions due to the coronavirus pandemic toward the second half of the quarter. This is likely to have thwarted demand for space.

Amid these, prior to the first-quarter earnings release, there is lack of any solid catalyst for becoming optimistic about the company’s prospects. The Zacks Consensus Estimate of FFO per share for the first quarter remained unchanged at 35 cents, over the past 30 days. Nevertheless, the figure suggests a year-over-year increase of 6.1%.

Here is what our quantitative model predicts:

Our proven model predicts a positive surprise in terms of FFO per share for Duke Realty this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of a FFO beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Duke Realty carries a Zacks Rank #3 and has an Earnings ESP of +2.86%.

Other Stocks That Warrant a Look

Here are a few other stocks in the REIT sector that you may want to consider, as our model shows that these too have the right combination of elements to report a positive surprise this quarter:

SBA Communications Corporation SBAC, set to report quarterly numbers on May 5, has an Earnings ESP of +0.44% and carries a Zacks Rank of 3 currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

CoreSite Realty Corporation COR, slated to release first-quarter earnings on Apr 30, has an Earnings ESP of +3.19% and carries a Zacks Rank of 3 at present.

Americold Realty Trust COLD, expected to release results on May 7, has an Earnings ESP of +9.74% 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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Duke Realty Corporation (DRE) : Free Stock Analysis Report
 
CoreSite Realty Corporation (COR) : Free Stock Analysis Report
 
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