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What's in Store for W. P. Carey (WPC) This Earnings Season?

Zacks Equity Research

W. P. Carey Inc. WPC is set to report fourth-quarter 2018 results before the market opens on Feb 22. Both its revenues and funds from operations (FFO) are anticipated to reflect year-over-year growth.

In the last reported quarter, this New York-based net-lease REIT delivered a positive surprise of 3.5% with respect to FFO per share.

The company has a decent surprise history. It surpassed estimates in each of the trailing four quarters, average positive surprise being 8.2%. The graph below depicts the surprise history of the company:

W.P. Carey Inc. Price and EPS Surprise

W.P. Carey Inc. Price and EPS Surprise | W.P. Carey Inc. Quote

Let’s see how things have shaped up for this announcement.

Factors to Consider

W. P. Carey is a diversified net lease REIT with a portfolio of critical corporate real estate which it leases back to creditworthy tenants on a long-term basis with built-in rent escalators. The company focuses on investing in high-quality single-tenant industrial, warehouse, offices and retail properties. These properties are located mainly in the United States, and Northern and Western Europe.

The fourth quarter was notable for W. P. Carey. Late in October, the company announced the completion of its $5.9-billion merger with one of its managed funds, Corporate Property Associates 17 – Global Incorporated (CPA:17). The move is aimed at helping the company support its earnings quality, aid in simplification of its business, enhance portfolio metrics, specifically, weighted average lease term, and tenant and industry diversification.

Further, in November, the company announced the acquisition of automotive dealership portfolio — four automotive retail and service sites — in the Netherlands for approximately $33 million (€29 million). Notably, the portfolio is triple-net leased to Van Mossel Automotive Group, a top Dutch automotive retail and leasing services providers for a term of 17 years.

Also, in December, W. P. Carey announced investments aggregating around $119 million. This included mission-critical properties triple-net leased to tenants with a weighted average lease term of approximately 20 years.

With a high-quality portfolio, W. P. Carey is likely to have witnessed high occupancy, growing rent and healthy lease revenues in the to-be-reported quarter. In addition, the company is likely to have witnessed an increase in the weighted average lease term of its portfolio.

W. P. Carey also aims at capitalizing on existing tenant relationships through accretive expansions, renovations and follow-on deals. The company has expertise in repositioning its assets through re-leasing, restructuring and strategic disposition. These efforts are likely to have supported its fourth-quarter performance. W. P. Carey’s investment-grade balance sheet with the opportunity to access multiple forms of capital are likely to have supported its growth endeavors in the Dec-end quarter.

Amid these, the company’s fourth-quarter revenues are pinned at $282.9 million, indicating a 43.63% surge from the prior-year quarter. Also, the Zacks Consensus Estimate for FFO per share for the quarter under review is $1.33, reflecting a 1.5% increase year over year.

However, there is a cutthroat competition for investments, both domestically and internationally. Also, W. P. Carey’s activities during the quarter were insufficient to secure analyst confidence. Consequently, the consensus estimate for fourth-quarter FFO per share remained unrevised at $1.33 in a month’s time.

Here is what our quantitative model predicts:

W. P. Carey does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

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

Earnings ESP: The Earnings ESP for W. P. Carey is 0.00%.

Zacks Rank: W. P. Carey has a Zacks Rank of 3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of a positive surprise.

Stocks That Warrant a Look

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

Hersha Hospitality Trust HT, scheduled to release earnings on Feb 25, has an Earnings ESP of +3.81% and carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Americold Realty Trust COLD, slated to release fourth-quarter results on Feb 21, has an Earnings ESP of +12.94% and holds a Zacks Rank of 3.

American Tower Corporation AMT, set to release earnings on Feb 27, has an Earnings ESP of +0.29% and carries a Zacks Rank of 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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