The U.S REIT sector has been showing an uptrend since
mid-September after witnessing significant volatility since the
middle of the year. This bullish run came on the back of the Fed's
'no taper' decision (of its Quantitative Easing Program, or QE) and
lower GDP projections for 2013 and 2014, which ensures a continued
low interest rate environment in the near term.
Since mid-September, the REIT stocks have rallied the most of
any sector and outperformed the S&P 500. On a total return
basis, in September, the broadest U.S. REIT Index -- FTSE/NAREIT
All REIT Index -- gained 3.55%, outpacing S&P 500's growth of
3.14%. Subsequently, the FTSE/NAREIT All REIT Index return gained
pace and came in at 6.13% on Oct 24, 2013, compared to 4.31% growth
for the S&P 500.
As disappointing government job reports add to the GDP woes, we
expect the Fed's QE program to continue longer than previously
anticipated. This should keep the demand for high-dividend-paying
REIT stocks alive.
The U.S. law requires REITs to distribute 90% of their annual
taxable income in the form of dividends to shareholders.
Yield-hungry investors thus have a large appetite for such stocks.
This has enabled the industry to stand out and gain footing over
the last 15-20 years. As of Sep 30, 2013, the dividend yield of the
FTSE NAREIT All REITs Index came in at 4.34%, outpacing the 2.14%
dividend yield offered by the S&P 500.
Hence, with the REIT stage set for recovery, it might be a good
idea to bet on a handful of REIT stocks that are scheduled to
report their earnings in the coming days and are poised to beat
estimates. An earnings beat will add to investors' confidence in
these stocks, leading to rapid price appreciation.
The Way to Pick the Right REITs
We make it fairly easy to choose the best stocks within the REIT
industry. One way to narrow down the list is by looking for a
combination of a favorable Zacks Rank -- Zacks Rank #1 (Strong
Buy), 2 (Buy) or 3 (Hold) -- and a positive Zacks Earnings ESP.
Earnings ESP is our proprietary methodology for identifying
stocks that have a high chance of surprising with their upcoming
earnings announcement. It shows the percentage difference between
the Most Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the
chance of a positive earnings surprise is as high as 70%.
Here are 3 REIT stocks that have the right combination of
elements to deliver an earnings beat in the upcoming
) is a Zacks Rank #2 stock with an earnings ESP of +3.70%. The
Zacks Consensus Estimate for the third quarter 2013 is $1.89 per
Glendale, California-based Public Storage is a leading
self-storage REIT. The company acquires, develops, owns and
operates self-storage facilities. Public Storage has facilities in
38 states of the U.S. and 7 Western European nations (operated
under the "Shurgard" brand). The company also has a 41% common
equity interest in
PS Business Parks Inc.
), a REIT that has commercial properties in the U.S.
The company has registered an average positive earnings surprise
of 1.94% over the trailing 12 months.
- Public Storage is scheduled to announce its third-quarter
2013 results after the market closes on Oct 31.
BRE Properties Inc.
) carries a Zacks Rank #2 and has an earnings ESP of +1.56%. The
Zacks Consensus Estimate for the third quarter is 64 cents per
San Francisco, California-based BRE Properties Inc. is an
apartment REIT that develops, acquires and manages communities
predominantly in the chief metropolitan markets of Southern and
Northern California, and Seattle. The properties of the company are
usually located near business, transportation, employment and
recreation centers of a city, which are essential for customers who
value the convenience, service and flexibility of rental
The company has registered a positive earnings surprise in three
out of last four quarters with an average beat of 2.08%.
- BRE Properties is scheduled to announce its third-quarter
2013 results after the market closes on Nov 4.
Cousins Properties Inc.
) has a Zacks Rank #3 and an earnings ESP of +20.00%. The Zacks
Consensus Estimate for the third quarter is pegged at 10 cents per
Atlanta, Georgia-based Cousins Properties Inc. mainly invests in
Class-A office towers in Sunbelt markets of the U.S., with special
focus on Georgia, Texas and North Carolina. With solid demographic
trends, the high growth Sunbelt markets offer decent upside
potential to this stock.
Moreover, the company has registered an average positive
earnings surprise of 14.04% over the trailing 12 months.
- Cousins Properties is expected to announce its
third-quarter 2013 results after the market closes on Oct
With the continuation of the QE program and consequent low
interest rate environment at least in the near term, REIT stocks
are expected to enjoy a decent run. Moreover, even when the
interest rate rises, the resultant economic improvement will create
demand for properties offered by REITs.
BRE PROPERTIES (BRE): Free Stock Analysis
COUSIN PROP INC (CUZ): Free Stock Analysis
PUBLIC STORAGE (PSA): Free Stock Analysis
PS BUSINESS PKS (PSB): Free Stock Analysis
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