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The Zacks Analyst Blog Highlights: GGP, UDR, Alexandria Real Estate Equities and CBRE Group

For Immediate Release

Chicago, IL - January 30, 2017 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include GGP Inc. (NYSE: GGP - Free Report ), UDR Inc. (NYSE: UDR - Free Report ), Alexandria Real Estate Equities, Inc. (NYSE: ARE - Free Report ) and CBRE Group Inc. (NYSE: CBG - Free Report ).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Friday's Analyst Blog:

REITs to Watch for Earnings on Jan. 30: GGP, UDR, ARE

The Q4 earnings season for real estate investment trust (REIT) stocks has already commenced and Monday marks the beginning of one of the busiest weeks of the season.

Retail REIT GGP Inc. (NYSE: GGP - Free Report ), Residential REIT UDR Inc. (NYSE: UDR - Free Report ) and office REIT Alexandria Real Estate Equities, Inc. (NYSE: ARE - Free Report ) are slated to report their earnings on Jan 30, 2017.

No doubt, the rate hike issue has been a consistent theme in the quarter and finally the increase did occur in Dec 2016. Also, there had been bond rout amid Trump's promise of strong fiscal stimulus. However, REITs have already managed their balance sheet well and focused on lowering debt ratios. In addition, rates are still much low, giving scope to REITs to absorb future hikes.

Nevertheless, apart from the rate factor, the performance of REIT stocks depends on the individual asset class dynamics and in the fourth quarter, not all the asset categories displayed solid strength in their fundamentals.

Office and industrial asset categories hogged the limelight for experiencing high demand. Going by numbers, per a study by the commercial real estate services' firm CBRE Group Inc. (NYSE: CBG - Free Report ), for the U.S. industrial market, availability fell for 26 straight quarters to 8.2% in the fourth quarter. Moreover, the overall office vacancy rate declined 10 basis points (bps) to 12.9% in fourth-quarter 2016, denoting the lowest level since first-quarter 2008.

However, supply issues in a number of markets have raised concerns for some of the residential REIT stocks. According to early apartment data from the AXIOMetrics, the fourth quarter witnessed a 1.2% sequential decrease in effective rents, marking a continuation of the trend of declining rents quarter over quarter. Also, occupancy of 94.7% in the fourth quarter was down from 95.1% in the third quarter and 95.0% in fourth-quarter 2015 as well. Furthermore, dwindling mall traffic and store closures amid aggressive growth in online sales kept retail REITs on tenterhooks.

Therefore, surprises might be in store for some and disappointment for other REITs, this earnings season. But to predict that, we rely on the Zacks methodology, combining a favorable Zacks Rank - Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) - and a positive Earnings ESP , to predict the chances of a beat this quarter. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Per our proprietary methodology, Earnings ESP shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Research shows that with this combination of rank and ESP, chances of a positive earnings surprise are as high as 70% for the stocks.

Let's have a look at what's in store for the three REITs set to release their results on Monday:

Retail REIT, GGP has a solid portfolio of high-quality retail properties across attractive locations in the U.S. GGP has an Earnings ESP of -2.33% and a Zacks Rank #3. Despite a favorable Zacks Rank, the negative ESP reduces the chance of any positive surprise this quarter. You can see the complete list of today's Zacks #1 Rank stocks here .

Amid an improving economy, GGP's retail properties have the capability to generate decent cash flows on the back of its cluster of renowned tenants. However, mall traffic continues to suffer, with online purchases growing by leaps and bounds. This trend has been curtailing demand for the retail real estate space significantly. While GGP has been striving to counter such pressure through various initiatives, we believe that implementation of such measures requires considerable upfront expenditure, which might limit near-term growth in profit margins. (Read More: Will Dismal Q4 Earnings Hit General Growth Stock? )

For the trailing four quarters, GGP has beat estimates in two quarters and met in the other two, posting an average positive surprise of 4.17%. This is depicted in the chart below.

UDR - a residential REIT focused on managing, buying, selling, developing and redeveloping attractive residential real estate properties in targeted U.S. markets - has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). This stock also lacks the right combination required for an earnings beat prediction.

Notably, UDR has a vast experience in the residential real estate market. However, it had to tackle elevated deliveries in a number of its markets, including San Francisco and New York. This remains a concern as elevated levels of supply restricts a landlord's ability to demand more rents and results in lesser absorption. (Read More: What's in Store for UDR Inc. this Earnings Season? )

This stock has met estimates in each of the trailing four quarters, as demonstrated in the chart below:

Alexandria Real Estate Equities - an urban office REIT that focuses on collaborative science and technology campuses in premium innovation cluster location - has an Earnings ESP of 0.00% and a Zacks Rank #3. Our proven model does not conclusively show that Alexandria Real Estate is likely to post a positive surprise in the quarter as it does not have the right combination of rank and ESP.

Over the trailing four quarters, it posted an average beat of -0.19%, having beaten the Zacks Consensus Estimate in one, meeting in another and missing in the rest two quarters. This is reflected in the chart below:

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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General Growth Properties, Inc. (GGP): Free Stock Analysis Report

United Dominion Realty Trust, Inc. (UDR): Free Stock Analysis Report

Alexandria Real Estate Equities, Inc. (ARE): Free Stock Analysis Report

CBRE Group, Inc. (CBG): 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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