What's in Store for Alexandria (ARE) This Earnings Season?
Alexandria Real Estate Equities Inc. ARE is scheduled to release first-quarter 2023 results on Apr 24 after the closing bell. Its quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.
In the last reported quarter, this Pasadena, CA-based life science real estate investment trust (REIT), focusing on collaborative life science, agtech and technology campuses in AAA innovation cluster locations, delivered a surprise of 0.47% in terms of adjusted FFO per share. ARE’s performance in the quarter was mainly driven by decent leasing activity and rental rate growth.
Alexandria has a decent surprise history. Over the preceding four quarters, its adjusted FFO per share surpassed the Zacks Consensus Estimate on each occasion, the average beat being 1.35%. This is depicted in the graph below:
Alexandria Real Estate Equities, Inc. Price and EPS Surprise
Alexandria Real Estate Equities, Inc. price-eps-surprise | Alexandria Real Estate Equities, Inc. Quote
Factors at Play
Alexandria’s Class A properties are situated in the AAA innovation cluster locations of North America, with significant market presence in Greater Boston, San Francisco Bay Area, New York City, San Diego, Seattle, Maryland and Research Triangle. These locations are characterized by high barriers to entry and a limited supply of available spaces.
In addition, the life-science industry has been benefiting from the increasing life expectancy of the United States population and biopharma drug development growth opportunities.
As a result, higher demand for life science real-estate assets and ARE’s strong pricing power in its core markets are likely to have aided leasing re-leasing activity during the first quarter.
Moreover, the advantageous locations of ARE’s properties are likely to have boosted occupancy levels. For first-quarter 2023, we expect occupancy to remain high at 94.9%.
Alexandria has a tenant base of more than 1,000 high-quality companies, and a major chunk of its rental revenues come from investment-grade or publicly-traded large-cap tenants. Its long-term lease agreements with these tenants are expected to have generated impressive rent collections in the to-be-reported quarter. We estimate rental income to grow 10.2% year over year in the first quarter.
Further, the company’s robust balance-sheet position is likely to have supported its development and redevelopment activities during the quarter under review.
Amid these tailwinds, Alexandria’s revenues and net operating income are anticipated to have witnessed growth. The Zacks Consensus Estimate for quarterly revenues currently stands at $679.88 million, suggesting a 10.5% increase from the prior-year period’s reported figure.
Our estimate for first-quarter total revenues is pegged at $679.3 million, implying year-over-year growth of 10.5%. Net operating income is expected to increase 11.4%.
However, the company’s activities in the to-be-reported quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been unchanged at $2.15 over the past two months. Nonetheless, the figure suggests a 4.9% increase from the prior-year quarter’s reported figure.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an FFO beat for Alexandria this time. The right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that is not the case here.
Earnings ESP: Alexandria has an Earnings ESP of -0.47%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: ARE currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks That Warrant a Look
Here are some stocks that are worth considering from the REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:
Boston Properties BXP is scheduled to report quarterly figures on Apr 25. BXP has an Earnings ESP of +7.13% and a Zacks Rank #3 currently.
VICI Properties VICI is slated to report quarterly numbers on May 1. VICI has an Earnings ESP of +3.34% and carries a Zacks Rank #2 (Buy) presently.
Host Hotels & Resorts HST is slated to release first-quarter earnings on May 3. HST has an Earnings ESP of +0.47% and a Zacks Rank #3 at present.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
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Host Hotels & Resorts, Inc. (HST) : Free Stock Analysis Report
Boston Properties, Inc. (BXP) : Free Stock Analysis Report
Alexandria Real Estate Equities, Inc. (ARE) : Free Stock Analysis Report
VICI Properties Inc. (VICI) : Free Stock Analysis Report
