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Is UDR Inc (UDR) Poised for a Beat this Earnings Season?

Residential real estate investment trust (“REIT”) UDR Inc. UDR is scheduled to report first-quarter 2016 results on Apr 25, after the market closes.

Last quarter, the Denver, CO-based REIT reported in-line results. UDR boasts an average beat of 1.83% for the trailing four quarters. For first-quarter 2016, the company expects funds from operations (“FFO”) per share in a range of 42–44 cents. The Zacks Consensus Estimate for first-quarter FFO per share is currently pegged at 43 cents.

Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that UDR is likely to beat estimates because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to beat estimates, and UDR has the right mix.  

Zacks ESP: The Earnings ESP, which is the percentage difference between the Most Accurate estimate of 44 cents and the Zacks Consensus Estimate of 43 cents, is +2.33%. This is a major indicator of a likely positive surprise.

Zacks Rank: UDR carries a Zacks Rank #3. The combination of UDR’s favorable Zacks Rank and positive ESP makes us confident of a positive surprise this season.

Conversely, we caution against stocks with Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.



What's Driving the Better-than-Expected Earnings?

With a vast experience in the residential real estate market, UDR is well-poised to gain from the strengthening of multifamily fundamentals and favorable demographic trends. The company’s prime renter – the 22 to 35 year old age bracket of the population – is growing and this trend is expected to continue in the next 15 years. Added to this, the improvement in the job market is driving demand for apartments.

As such, UDR is expected to experience growth in same-store net operating income in the first quarter. This growth is expected to be driven by a solid increase in rates which in turn should increase revenue per occupied homes.

Other Stocks That Warrant a Look

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

Essex Property Trust Inc. ESS has an Earnings ESP of +1.14% and a Zacks Rank #2. The company will report results on Apr 28.

Taubman Centers, Inc. TCO has an Earnings ESP of +3.53% and a Zacks Rank #3. The company will release results on May 2.

Vornado Realty Trust VNO has an Earnings ESP of +4.03% and a Zacks Rank #3. The company will report first-quarter 2016 results on May 2.

Note: 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. All earnings per share numbers presented in this write up represent FFO per share.

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TAUBMAN CENTERS (TCO): Free Stock Analysis Report
 
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