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REITs to Watch for Earnings on May 2: ESS, MAA, MAC & More


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We are in the heart of the Q1 reporting cycle and the real estate investment trust (REIT) space is bustling with activity as there is a deluge of Q1 earnings releases lined up for this week, including Essex Property Trust, Inc. ESS , Mid-America Apartment Communities, Inc. MAA , The Macerich Company MAC , Federal Realty Investment Trust FRT , Host Hotels & Resorts, Inc. HST and Equinix, Inc. EQIX . These companies are slated to release their quarterly numbers on May 2.

Per our latest Earnings Preview , total Finance Sector earnings, of which REITs are a part, for the Jan-Mar quarter are expected to increase 27% based on 4.7% increase in revenues, as compared with the prior-year quarter.

Particularly, with underlying asset categories and the location of properties playing a vital role in determining REITs' performance, not all the companies in this space are equally poised to excel or fall behind, this season.

Let's have a close look at the factors that will impact the above-mentioned REITs' first-quarter results.

Mid-America Apartment Communities - commonly known as MAA - maintains a well-balanced portfolio in the Southeast and the Southwest regions of the United States. Further, favorable demographics and strong job growth in target markets are anticipated to drive demand for MAA's properties. The Zacks Consensus Estimate for first-quarter total revenues is currently pegged at $385 million, denoting projected growth of 1.6% year over year.

Notably, per the latest report from the real estate technology and analytics firm - RealPage, Inc. RP - the national apartment market remained moderated in first-quarter 2018. Annual rent growth slipped to 2.3% in Q1 which marked moderation from the 2.6-2.9% growth rate experienced throughout 2017. Occupancy level of 94.5% in March edged down from the prior-year tally of 95%. Nevertheless, the overall occupancy level is still healthy and the first quarter usually marks a slow leasing period, thanks to the cold weather that inhibits shift of households

Further, there is an increasing apartment supply in a number of markets of MAA. This high supply is likely to put pressure on rental rates in the to-be-reported quarter. In addition, there is high-concession activity amid elevated supply, which remains a concern.

The Zacks Consensus Estimate is currently pegged at $1.46, which indicates no movement on a year-over-year basis. (Read more: Mid-America Apartment Q1 Earnings: What's in Store? )

Our proven model does not conclusively show that MAA is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

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

Although the company has an Earnings ESP of +0.78%, an unfavorable Zacks Rank of 4 (Sell) makes it difficult for our proven model to conclusively predict a likely earnings beat this season.

However, the company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, which is depicted in the graph below:

Mid-America Apartment Communities, Inc. Price and EPS Surprise

Mid-America Apartment Communities, Inc. Price and EPS Surprise | Mid-America Apartment Communities, Inc. Quote

Essex Property 's focus on acquisition and development of West Coast properties is predicted to have offered ample scope to enhance its top line in the to-be-reported quarter. Further, a solid balance sheet and financial flexibility raise our confidence in the company.

Amid these, the Zacks Consensus Estimate for first-quarter revenues is pegged at $347.5 million, marking an expected increase of 3.6% year over year.

The Zacks Consensus Estimate of FFO per share for the first quarter is currently pegged at $3.05. It reflects 3.7% growth from the prior-year quarter. (Read more: What's in the Offing for Essex Property Q1 Earnings? )

Also, chances of Essex Property beating the Zacks Consensus Estimate in the quarter are high. This is because it has an Earnings ESP of 0.05% and a Zacks Rank of 3.

The story about Essex Property's surprise history is better told by the chart below:

Essex Property Trust, Inc. Price and EPS Surprise

Essex Property Trust, Inc. Price and EPS Surprise | Essex Property Trust, Inc. Quote

Federal Realty has been taking advantage of the redevelopment opportunities. Amid a fast-evolving retail environment, the company is making strategic efforts to reposition, redevelop and re-merchandise its portfolio. These efforts will help the company to counter competition from e-retailers.

Total rental income is projected to be $220 million, which remains unchanged from the prior-quarter tally. The Zacks Consensus Estimate for first-quarter revenues is pegged at $223.8 million, indicating a year-over-year improvement of 7.9%. However, with store closures and retailer's bankruptcy filing the retail real estate remains choppy. Amid this, the Zacks Consensus Estimate of percentage rents of $3.02 million reflect a 16.6% decline compared with the prior quarter.

The Zacks Consensus Estimate for Q1 FFO per share is $1.50 which indicates a year-over-year rise of 3.5%. (Read more: What's in Store for Federal Realty in Q1 Earnings? )

Federal Realty carries a Zacks Rank of 3. Despite this favorable rank, the Earnings ESP of -0.29% lowers chances of an earnings beat. You can see  the complete list of today's Zacks #1 Rank stocks here .

The graph below depicts the decent surprise history of the company:

Federal Realty Investment Trust Price and EPS Surprise

Federal Realty Investment Trust Price and EPS Surprise | Federal Realty Investment Trust Quote

Macerich has a strong portfolio of premium malls in vibrant U.S. markets. We anticipate the company to have enjoyed a stable source of rent in the to-be-reported quarter from its tenants that include several well-capitalized retailers.

Although the company is resorting to different strategies, mall traffic continues to remain considerably depressed with consumers increasingly opting for online purchases. This has led to rising number of retailers joining the dot-com bandwagon. In fact, the first few months of the year witnessed several preeminent retail bankruptcy filings and record-high defaults by retail corporates.

The Zacks Consensus Estimate for the first-quarter minimum rental revenues is currently pegged at $142 million. This indicates a sequential decline of 6%. The Zacks Consensus Estimate for percentage rents of $1.7 million reflects a 10% dip from the prior-year quarter.

Further, the Zacks Consensus Estimate for first-quarter revenues is pegged at $214.8 million, indicating a year-over-year fall of 13.1%. Also, the Zacks Consensus Estimate for FFO per share is currently pegged at 81 cents. This indicates a decline of 6.9% year over year. (Read more: What's in the Cards for Macerich This Earnings Season? )

Macerich carries a Zacks Rank of 3. Despite this favorable rank, the Earnings ESP of -1.10% lowers chances of an earnings beat.

Moreover, the company has a mixed surprise history, as evident from the chart below:

Macerich Company (The) Price and EPS Surprise

Macerich Company (The) Price and EPS Surprise | Macerich Company (The) Quote

Host Hotels boasts a portfolio of upscale hotels across potential markets in the United States. Also, the company is making concerted efforts to enhance the quality of its portfolio through the strategic capital-recycling program.

Though supply growth has been sluggish in the past, it has gathered momentum, of late. In fact, growth is expected to remain elevated in 2018, particularly in markets, where the company has exposure.

Moreover, in the fourth-quarter 2017 conference call, management stated that the company's performance is likely to be the weakest in first-quarter 2018. This is due to tough comparisons, resulting from inauguration and Women's March in D.C. last year as well as the Easter weekend, beginning on Mar 30 this year.

The Zacks Consensus Estimate for first-quarter revenues is pegged at $1.32 billion, indicating an expected decline of 1.9% year over year. The Zacks Consensus Estimate for Room Revenues is pegged at $824 million, down from $847 million reported in the prior quarter.

The Zacks Consensus Estimate of FFO per share for the first quarter is 41 cents. The figure denotes an estimated decrease of 6.8% year over year. (Read more: Host Hotels to Report Q1 Earnings: What's in Store? )

Though Host Hotels has a favorable Zacks Rank of 3, its Earnings ESP of -2.88% makes surprise prediction difficult.

The story about Host Hotel's surprise history is better told by the chart below:

Host Hotels & Resorts, Inc. Price and EPS Surprise

Host Hotels & Resorts, Inc. Price and EPS Surprise | Host Hotels & Resorts, Inc. Quote

Equinix is a global provider of network-neutral data centers and internet-exchange services for enterprises, content companies, systems integrators and network service providers. The company operates across various geographical regions and its increasing popularity among major tech-industry players, those are looking for data management, is likely to drive revenues in the quarter.

The Zacks Consensus Estimate for revenues is pegged at $1.21 billion for the quarter under review, reflecting projected growth of 27.6% from the year-ago period.

However, we remain slightly cautious about the huge capital outlays, which might dent Equinix's first-quarter profitability. Growing debt burden will affect the company's profitability in the quarter under review as interest expenses would flare up.

The Zacks Consensus Estimate for FFO per share of $4.94 for the first quarter witnessed a rise of 19.3% from the prior-year quarter. (Read more: What's in Store for Equinix Stock in Q1 Earnings? )

Furthermore, with an Earnings ESP of 0.00% and a Zacks Rank of 3, our proven model does not conclusively show that the company will beat estimates this season.

However, the company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, which is depicted in the graph below:

Equinix, Inc. Price and EPS Surprise

Equinix, Inc. Price and EPS Surprise | Equinix, Inc. Quote

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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RealPage, Inc. (RP): Free Stock Analysis Report

Equinix, Inc. (EQIX): Free Stock Analysis Report

Macerich Company (The) (MAC): Free Stock Analysis Report

Federal Realty Investment Trust (FRT): Free Stock Analysis Report

Mid-America Apartment Communities, Inc. (MAA): Free Stock Analysis Report

Essex Property Trust, Inc. (ESS): Free Stock Analysis Report

Host Hotels & Resorts, Inc. (HST): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: RP , EQIX , MAC , FRT , MAA


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