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What's in Store for W. P. Carey (WPC) This Earnings Season?

W. P. Carey Inc. WPC is set to report third-quarter 2020 results on Oct 30 before the market opens. Both its revenues and funds from operations (FFO) per share might display year-over-year declines.

In the last reported quarter, this New York-based net-lease REIT delivered a positive surprise of 2.7% with respect to FFO per share.

The company has a decent surprise history. It surpassed estimates in each of the trailing four quarters, the average surprise being 2.49%. The graph below depicts the surprise history of the company:

W.P. Carey Inc. Price and EPS Surprise

W.P. Carey Inc. Price and EPS Surprise

W.P. Carey Inc. price-eps-surprise | W.P. Carey Inc. Quote

Let’s see how things have shaped up for this announcement.

Factors to Consider

This diversified net lease REIT is poised to benefit from its portfolio of critical corporate real estate which it leases back to creditworthy tenants on a long-term basis with built-in rent escalators. The company focuses on investing in high-quality single-tenant industrial, warehouse, office, retail and self-storage properties. These properties are located mainly in the United States, and Northern and Western Europe.

W. P. Carey has collected 99% of September rent due, 98% of August rent due and 99% of July rent due. The company’s rent collections have been healthy across industrial, warehouse, office and retail properties. The company, in fact, has limited retail exposure and primarily has large tenants in its roster.

Moreover, the company is focused on capitalizing on accretive investment opportunities. In September, W. P. Carey announced industrial property investments worth $44 million. These include mission-critical industrial properties, which were acquired through sale-leaseback transaction.

However, rent collection is lagging in its Fitness, Theater and Restaurants portfolio. In addition, the continued uncertainty surrounding the pandemic and its impact on economic activity is affecting demand for a number of real estates and W. P. Carey’s portfolio is also not immune to such impacts.

Amid these, the company’s third-quarter revenues are pinned at $289.9 million, indicating an 8.8% decline from the prior-year quarter.

Further, W. P. Carey’s activities during the quarter under review were inadequate to secure analyst confidence. Consequently, the consensus estimate for third-quarter FFO per share has moved 1.7% south to $1.14 in a month’s time. It also suggests a 12.3% decrease year over year.

Here is what our quantitative model predicts:

Our proven model does not conclusively predict a positive surprise in terms of FFO per share for W. P. Carey this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

W. P. Carey currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of +1.75%.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

Lexington Realty Trust LXP, set to report quarterly numbers on Nov 5, currently has an Earnings ESP of +1.33% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

National Storage Affiliates Trust NSA, slated to release third-quarter earnings on Nov 5, has an Earnings ESP of +1.94% and a Zacks Rank of 2 at present.

Ventas, Inc. VTR, scheduled to announce earnings results on Nov 6, has an Earnings ESP of +2.03% and a Zacks Rank of 3 at present.

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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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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