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REITs Q3 Earnings: Key Predictions for DLR, DRE, KIM & MAA

As we tread into another busy week of the current reporting cycle, a lot of activity can be noticed in the real estate investment trust (REIT) space. The Q3 earnings line-up for this week includes Digital Realty Trust, Inc. DLR , Duke Realty Corp. DRE , Kimco Realty Corporation KIM and Mid-America Apartment Communities, Inc. MAA .

Improvement in the macroeconomic scenario has fueled demand amongst several asset classes in third-quarter 2017.

Data-center REITs thrived amid growth in cloud computing, Internet of Things and big data, and an increasing number of companies opting for third-party IT infrastructure.

As giant e-commerce chains continue to invade market share from physical retailers, greater inventory build-up and increasing focus on supply-chain efficiencies spiked demand for logistics infrastructure and warehouse facilities. This has driven the industrial real estate market's growth during the quarter.

Further, recovery in the economy and labor markets has resulted in increased manufacturing activities. This has helped warehouses and distribution centers enjoy higher occupancy and demand.

However, rising popularity of e-retail has become a key cause of concern for retail REITs. The increasing number of retailers jumping on the dot-com bandwagon is putting pressure on the top-line figure for these REITs. Subsequently, the significant drop in mall footfall has compelled a number of retailers to opt for store closures and file for bankruptcy.

Residential REITs enjoyed high occupancy rates and stable rent growth in the third quarter.

Let us take a look at how the following REITs are placed ahead of their quarterly releases on Oct 25.

Amid escalating demand for data centers, Digital Realty 's focus on offering upgraded technology to lure clients is likely to bolster its revenue stream in the to-be-reported quarter.

In addition to this, the company is anticipated to ride on its growth curve backed by strategic acquisitions. We expect such diligent efforts to drive the company's top line in the quarter to be reported.

The Zacks Consensus Estimate for third-quarter revenues of $593.2 million indicates a year-over-year increase of 8.6%.

Currently, the Earnings ESP for Digital Realty is -0.26%. Although the stock's Zacks Rank #2 (Buy) increases the predictive power of ESP, we also need to have a positive ESP to be confident of an earnings beat. (Read more: Digital Realty Q3 Earnings: What's in the Offing? )

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

Digital Realty Trust, Inc. Price and EPS Surprise

Digital Realty Trust, Inc. Price and EPS Surprise | Digital Realty Trust, Inc. Quote

Commercial REIT Duke Realty has been putting in diligent efforts to lower its suburban office assets and turn the company into a leading domestic pure-play industrial REIT. Subsequently, in the second quarter, it sold its medical office building (MOB) portfolio for $2.8 billion. Part of the transactional proceeds will likely be reflected in the third quarter results.

Amid an e-commerce boom, the company has made sound efforts to enhance its industrial portfolio. While such streamlining efforts are a strategic fit for the long term, the near-term dilutive effect cannot be bypassed. In fact, such short-term impact is expected to mar the company's quarterly results.

At present, Duke Realty has a Zacks Rank #3 (Hold) and an Earnings ESP of -3.93%. Though the company has a favorable Zacks Rank, the negative ESP lowers chances of an earnings beat. (Read more: Duke Realty to Post Q3 Earnings: What's in Store? )

Duke Realty Corporation Price and EPS Surprise

Duke Realty Corporation Price and EPS Surprise | Duke Realty Corporation Quote

New Hyde Park, NY-based Kimco has been taking long strides and is progressing well with its strategic 2020 Vision. The company has been purchasing premium assets in key U.S. markets and carrying out joint-venture buyouts.

The Zacks Consensus Estimate for third-quarter revenues of $294.8 million indicates growth of around 5.6% year over year.

As part of its portfolio-upgrade strategy, Kimco is aggressively disposing non-core assets. While these efforts are encouraging for the longer run, the earnings dilution led by high-disposition activity cannot be averted in the near term. Therefore, these moves are expected to hurt the company's growth momentum in the quarter to be reported.

At present, Kimco has a Zacks Rank #3 and an Earnings ESP of 0.00%. Though the Zacks Rank is favorable, we also need to have a positive ESP to be confident of an earnings beat. (Read more: What's in the Offing for Kimco Realty in Q3 Earnings? )

Kimco Realty Corporation Price and EPS Surprise

Kimco Realty Corporation Price and EPS Surprise | Kimco Realty Corporation Quote

Residential REIT Mid-America Apartment Communities , commonly known as MAA, maintains a well-balanced portfolio. It has a robust presence in around 39 Metropolitan Statistical Areas (MSAs), located in the Southeast and Southwest regions of the United States. Also, remarkable job growth in target markets is anticipated to keep demand for the company's portfolio higher.

MAA is expected to experience high occupancy and achieve stability. For the third quarter, the company projects FFO per share in the range of $1.39-$1.49 per share. The Zacks Consensus Estimate for the same inched up 0.7% to $1.48 over the past week.

At present, MAA has an Earnings ESP of +0.95% and a Zacks Rank #3. This combination makes us reasonably confident of a positive surprise this season. (Read more: Can Occupancy & Rental Growth Aid MAA's Q3 Earnings Numbers? )

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

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

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

Note: All earnings per share numbers presented in this report represent funds from operations ("FFO") per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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Kimco Realty Corporation (KIM): Free Stock Analysis Report

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Duke Realty Corporation (DRE): Free Stock Analysis Report

Digital Realty Trust, Inc. (DLR): 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.


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

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