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REITs to Watch for Earnings on May 7: AIV, OHI, APLE & More


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We are in the last leg of the Q1 earnings season and 343 S&P 500 members have already reported their quarterly results, as of May 2. Going by the encouraging trends, the first quarter looks well poised to record robust earnings and revenue growth. Earnings for the S&P 500 members, that have already reported, are up 24% from the same period last year, on 9.5% higher revenues, with 78.4% outpacing EPS estimates and 75.8% beating on revenues.

Per our latest Earnings Preview , overall earnings in the first quarter, for all the S&P 500 members, are projected to be up 23.1% on 8.6% growth in revenues.

Amid the positive earnings outlook for Q1, let's concentrate on earnings of the Finance  Sector, which includes real estate investment trusts (REITs) too. Total earnings of companies in the sector, which have reported quarterly figures so far, have climbed 27.1% year over year on 9.1% higher revenues. 

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. In fact, rate hike and cautious approach of investors have affected returns from this industry, so far, this year. 

Let's take a look at REITs scheduled to report first-quarter 2018 earnings on May 7, and see how things are shaping up for the upcoming results.

Apartment Investment & Management Co.  AIV - commonly known as Aimco - has a diversified portfolio, both in terms of geography and price point. This is likely to have aided the company to meet the increase in demand for apartment properties from echo boomers - children of the baby-boomer generation - in the to-be-reported quarter.

Also, Aimco has been making concerted efforts to revamp its portfolio through property sales and by reinvesting the proceeds in select apartment homes with higher rents, superior margins and higher-than-expected growth. (Read more: Aimco to Report Q1 Earnings: Is a Beat in the Cards? )

Prior to the first-quarter earnings release, there is a lack of any solid catalyst for raising optimism about the company's business activities and prospects. Over the past month, the Zacks Consensus Estimate for funds from operation (FFO) per share in the soon-to-be-reported quarter remained unchanged at 60 cents. This indicates a 3.5% increase year over year. For the first quarter, management projects pro-forma FFO per share in the band of 57-61 cents.

Our proven model shows that Aimco has the right combination of the two key ingredients -positive  Earnings ESP  and a Zacks Rank #3 (Hold) or better - to increase the odds of an earnings beat in the first quarter.

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

The company has an Earnings ESP of +0.24% and a favorable Zacks Rank of 3.

Over the trailing four quarters, the company outpaced the Zacks Consensus Estimate in two occasions and reported in-line numbers in the other two, which is depicted in the graph below:

Apartment Investment and Management Company Price and EPS Surprise

Apartment Investment and Management Company Price and EPS Surprise | Apartment Investment and Management Company Quote

Omega Healthcare Investors, Inc. OHI invests principally in long-term care facilities located in the United States and the U.K. It provides lease or mortgage financing to qualified operators of skilled nursing facilities (SNFs) and, to a lesser extent, assisted living facilities (ALFs), independent living facilities, and rehabilitation and acute care facilities.

The Zacks Consensus Estimate for rental income of $195 million reflects a marginal increase from the year-ago figure of $193 million.

However, the Zacks Consensus Estimate for FFO per share of 75 cents reflects year-over-year decline of 12.8%. Further, the consensus estimate for sales is $216.3 million for the to-be-reported quarter, underscoring a fall of 6.65% year over year.

Omega Healthcare Investors, Inc. Price and EPS Surprise

Omega Healthcare Investors, Inc. Price and EPS Surprise | Omega Healthcare Investors, Inc. Quote

Omega Healthcare has an Earnings ESP of -0.89% and an unfavorable Zacks Rank of 4 (Sell) that makes it difficult for our proven model to conclusively predict a likely earnings beat this season.

You can see  the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Apple Hospitality REIT, Inc. APLE has a portfolio consisting of hotels, guest rooms and resorts. At the first-quarter end, we anticipate the company to have witnessed year-over-year expansion of its portfolio, with ownership of 241 hotels and 30,585 rooms.

Subsequently, the Zacks Consensus Estimate for revenues from guest rooms at $275 million indicates 2.2% improvement from prior-year quarter. Overall portfolio occupancy is expected to have moderately increased to 75%.

While its FFO per share are estimated to have remained unchanged, revenues might have increased year over year.

Despite a favorable Zacks Rank of 3, the Earnings ESP of 0.00% lowers chances of an earnings beat. 

Also, in each of the preceding four quarters, the company's results outpaced the Zacks Consensus Estimate in one occasion, missed in two, and met in another, as depicted in the graph below:

Apple Hospitality REIT, Inc. Price and EPS Surprise

Apple Hospitality REIT, Inc. Price and EPS Surprise | Apple Hospitality REIT, Inc. Quote

Equity Commonwealth EQC primarily owns office buildings located throughout the United States. Notably, majority of its portfolio consists of office buildings located in central business districts, or CBDs, of major metropolitan markets. Amid rising supply of office assets, vacancy rates ticked up and rent growth slowed in the first quarter. This is expected to have impacted the quarterly performance of Equity Commonwealth.

Amid these, the Zacks Consensus Estimate for first-quarter revenues of $71.9 million indicates a steep decline of 27.8% from the year-earlier quarter. Furthermore, the company's activities during the quarter could not gain adequate analyst confidence. Consequently, the Zacks Consensus Estimate for FFO per share of 17 cents for the first quarter remained unchanged, over the past month. The figure reflects 37.04% decline from the prior-year quarter.

In fact, an unfavorable Zacks Rank of 4 (Sell), along with Earnings ESP of 0.00%, makes surprise prediction difficult.

Over the last four quarters, the company missed the FFO per share estimates in three occasions and beat in another, resulting in an average negative surprise of 5.35%. This is depicted in the graph below:

Equity Commonwealth Price and EPS Surprise

Equity Commonwealth Price and EPS Surprise | Equity Commonwealth Quote

Sunstone Hotel Investors, Inc. SHO is a lodging REIT that owns and manages hotels, primarily in the upper-upscale and upscale segments, which are particularly operated under franchises owned by nationally-recognized companies, such as Marriott, Hilton, InterContinental and Hyatt. The company has a high quality and well diversified portfolio, located in the most dynamic locations of the country. Significant capital investments, in a bid to reposition the portfolio, are expected to have boosted the operating performance of the company.

However, the Zacks Consensus Estimate for the first-quarter revenues is pegged at $258.3 million and represents 8% year-over-year decline. Also, the Zacks Consensus Estimate for FFO per share remained unchanged at 19 cents, over the past month, and indicates an estimated year-over-year fall of 20.8%.

Nonetheless, it has an impressive surprise history, beating estimates in each of the past four quarters, as depicted in the graph below:

Sunstone Hotel Investors, Inc. Price and EPS Surprise

Sunstone Hotel Investors, Inc. Price and EPS Surprise | Sunstone Hotel Investors, Inc. Quote

Also, chances of Sunstone beating the Zacks Consensus Estimate in the quarter are high. This is because it has an Earnings ESP of 10.5% and a Zacks Rank of 2 (Buy).

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) - a widely used metric to gauge the performance of REITs.

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Apartment Investment and Management Company (AIV): Free Stock Analysis Report

Sunstone Hotel Investors, Inc. (SHO): Free Stock Analysis Report

Omega Healthcare Investors, Inc. (OHI): Free Stock Analysis Report

Apple Hospitality REIT, Inc. (APLE): Free Stock Analysis Report

Equity Commonwealth (EQC): 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: AIV , SHO , OHI , APLE , EQC


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