It has been about a month since the last earnings report for Alexandria Real Estate Equities (ARE). Shares have added about 5.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Alexandria Real Estate Equities due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Alexandria Q4 FFO & Revenues Miss Estimates, Up Y/Y
Alexandria Real Estate Equities reported fourth-quarter 2018 adjusted FFO of $1.68 per share, missing the Zacks Consensus Estimate by a whisker. Quarterly revenues of $340.5 million also missed Zacks Consensus Estimate of $344.5 million.
However, on a year-over-year basis, adjusted FFO per share increased 9.8% from $1.53 in the prior-year quarter while revenues jumped 13.9% year over year. Results reflect decent internal and external growth. Particularly, the company witnessed decent rental rate growth of 17.4% in the fourth quarter. However, expenses related to rental operations and interest rose 10.9% and 11.5% year over year, respectively.
Behind the Headline Numbers
Alexandria’s total leasing activity aggregated around 1,558,064 rentable square feet (RSF) of space during the quarter under review.
On a year-over-year basis, same-property NOI grew 3.8%. It climbed 7.6% on a cash basis. Occupancy of operating properties in North America remained high at 97.3%.
As of fourth-quarter 2018, investment-grade or large-cap tenants accounted for 52% of annual rental revenues in effect. Furthermore, 77% of the annual rental revenues are from Class A properties in AAA locations.
Notably, during the Oct-Dec quarter, the company acquired three properties, for $155.0 million, in two key submarkets.
Alexandria exited 2018 with cash and cash equivalents of $234.2 million, up from $204.2 million reported at the end of the previous quarter. The company had $2.4 billion of liquidity as of the end of the reported quarter.
Alexandria guided its adjusted FFO per share for 2019 in the range of $6.85-$7.05.
The company’s 2018 guidance is backed by expectations for occupancy in North America (as of Dec 31, 2019) in the band of 97.7- 98.3%, rental rate increases for lease renewals, and re-leasing of space of 25.0-28.0%, and same-property NOI growth of 1.0- 3.0%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
Currently, Alexandria Real Estate Equities has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Alexandria Real Estate Equities has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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