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What's in Store for Alexandria (ARE) This Earnings Season?

Alexandria's (ARE) Q3 results will likely reflect benefits of having premium properties in strategic cluster locations and creditworthy tenants.

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This story originally appeared on Zacks

Alexandria Real Estate Equities Inc. ARE is slated to report third-quarter 2021 results on Oct 25, after market close. The company’s quarterly results will likely highlight growth in funds from operations (FFO) per share.

- Zacks

In the last reported quarter, this Pasadena, CA-based urban office real estate investment trust (REIT), primarily focused on collaborative life-science and technology campuses, delivered a surprise of 2.12% in terms of FFO per share. The company witnessed continued healthy leasing activity and rental rate growth during the quarter.

Over the preceding four quarters, the company surpassed the Zacks Consensus Estimate on two occasions and met in the other two, the average beat being 1.34%. The graph below depicts this surprise history:

Alexandria Real Estate Equities, Inc. Price and EPS Surprise Alexandria Real Estate Equities, Inc. Price and EPS Surprise

Alexandria Real Estate Equities, Inc. price-eps-surprise | Alexandria Real Estate Equities, Inc. Quote

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

Factors at Play

Amid the heightening need for effective diagnostics, therapies and vaccines to fight the health crisis, Alexandria’s properties and tenants have become indispensable. Its high quality lab office assets positioned in key locations are anticipated to have seen solid demand. Hence, the company is likely to have witnessed healthy leasing activity, decent rental rate growth and occupancy during the third quarter.

The company has Class A properties in AAA locations. With high demand, its ownership of such premium properties in strategic cluster locations is likely to have driven the occupancy levels and rent growth during the September-end quarter. Moreover, with a substantial part of Alexandria’s revenues coming from investment-grade or publicly-traded large-cap tenants, rent collections during the to-be-reported quarter are likely to have been impressive.

These are anticipated to have aided revenue and net operating income growth for the company during the third quarter. Also, Alexandria has adequate financial flexibility to cushion and enhance its market position, which is expected to have continued in the quarter under review.

The Zacks Consensus Estimate for the quarterly FFO per share is currently pinned at $1.94, suggesting a 6.01% increase from the prior-year period.

However, prior to the third-quarter earnings release, there is lack of any solid catalyst to be optimistic. Hence, the Zacks Consensus Estimate for the quarterly FFO per share has remained unchanged over the past month.

Here is what our quantitative model predicts:

Alexandria does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of a FFO beat.

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

Earnings ESP: The Earnings ESP for Alexandria is 0.00%.

Zacks Rank: Alexandria currently carries a Zacks Rank of 3 (Hold).

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 surprise this quarter:

Apple Hospitality REIT APLE, slated to release third-quarter earnings on Nov 4, has an Earnings ESP of +26.67% and sports a Zacks Rank of 1, at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Life Storage, Inc. LSI, scheduled to report quarterly figures on Nov 2, has an Earnings ESP of +0.10% and currently flaunts a Zacks Rank of 1.

EastGroup Properties, Inc. EGP, set to announce quarterly figures on Oct 26, has an Earnings ESP of +0.58% and carries a Zacks Rank of 2, 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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