REIT's Poised for Q4 Earnings Beats
REIT stock prices have been on a roller coaster over the past one
year due to concerns surrounding the interest rate environment with
the Federal Reserve's movement related to the economic stimulus.
Finally, convinced by the consistent pickup in economic activity
and labor market improvement, the Federal Reserve started tapering
its bond buying program. With gradual reduction in the Fed's
support, interest rates are expected to increase, which may in turn
hurt the rate-sensitive business of REITs in the long run.
The broader picture, however, does not take away opportunities from
portfolio diversification that REITs offer owing to their distinct
asset class status. Real estate comprises different types of assets
that perform based on individual market dynamics. Investors too can
gain maximum leverage from the changes seen time to time in
performances by these assets.
A solid GDP report and encouraging U.S. retail data clearly
indicate growing consumer confidence; and the Fed's new-found faith
in the economy further reinforces that. Consequently, this is an
opportune moment for companies providing real estate support to the
Moreover, with the interest rate still remaining at a low level,
REITs will continue to benefit in the short term. So you should
consider adding some high potential REITs to your portfolio now.
Amid lower supply of new properties, steadily rising demand is
shaping up as the sector's growth driver for years to come.
As per recent analysis by the commercial real estate services firm
CBRE Group, Inc.
(CBG), the retail availability rate fell 30 bps to 12.0% for the
fourth quarter and moved 70 bps down for 2013, reflecting
consistent improvement in net absorption. CBRE's outlook of a
further drop in the availability rate for neighborhood and
community shopping centers to 10.6% in 2014 is added good news for
How to Find a Top Pick
Picking the right stock from different sub sectors and stock
diversity in the REIT sector could be a tall order. But an easy way
to narrow down the list is to take a look at stocks with favorable
Zacks Rank and positive Zacks
Earnings ESP is our proprietary methodology for determining stocks
having the best chance to surprise with their next earnings
announcement. It shows the percentage difference between the Most
Accurate Estimate and the Zacks Consensus Estimate.
The combination of a favorable Zacks Rank - Zacks Rank #1 (Strong
Buy) or 2 (Buy) or 3 (Hold) - and a positive earnings ESP, is
usually a solid indication of earnings beat. 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 their upcoming announcements.
Surely, an earnings beat would reinforce investors' confidence in
these stocks and result in quick price appreciation. This, along
with the solid dividend income that these REITs offer, guarantees
Spirit Realty Capital, Inc.
) has a Zacks Rank #3 and an earnings ESP of +5.26%. The Zacks
Consensus Estimate for the fourth quarter is pegged at 19 cents per
share. Moreover, the company has delivered an average positive
earnings surprise of 20.0% over the trailing 4 quarters.
Scottsdale, Arizona-based Spirit Realty makes nation-wide
investments in single tenant, operationally essential real estate
where the tenants carry out retail, service or distribution
activities. With consumer confidence building up and economic
activity gaining momentum, we believe the demand for such
properties would go up and in turn offer decent upside potential to
the stock price.
Spirit Realty is expected to announce its fourth-quarter
results after market close on Feb 27.
) is a Zacks Rank #3 stock with an earnings ESP of +3.45%. The
Zacks Consensus Estimate for the fourth quarter is 29 cents per
Beachwood, Ohio-based DDR Corp. is a retail REITs which acquires,
owns, develops, redevelops, leases and manages shopping centers,
especially in high growth areas in the continental United States,
Puerto Rico and Brazil.
DDR is scheduled to announce its fourth -quarter results after
market close on Feb 12.
Realty Income Corp.
) carries a Zacks Rank #2 and has an earnings ESP of + 1.64%. The
Zacks Consensus Estimate for the fourth quarter is 61 cents per
share. The company has registered a positive earnings surprise in
three out of last four quarters with an average beat of 1.36 %.
Escondido, Calif.-based monthly dividend company owns more than
3,800 properties under long-term lease deals with regional and
national retail chains as well as other commercial enterprises.
- Realty Income is scheduled to announce its fourth-quarter
results on Feb 13.
DDR CORP (DDR): Free Stock Analysis Report
REALTY INCOME (O): Free Stock Analysis Report
SPIRIT REALTY (SRC): Free Stock Analysis Report
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