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Alexandria (ARE) to Post Q2 Earnings: What's in the Offing?

Alexandria Real Estate Equities, Inc. ARE is slated to report second-quarter 2017 results on Jul 31, after the market closes.

In the prior quarter, this Pasadena, CA-based urban office real estate investment trust (“REIT”) with particular focus on collaborative life science and technology campuses, generated a positive surprise of 1.37% in terms of funds from operations (“FFO”) per share. Results were backed by solid growth in revenues.

Over the trailing four quarters, the company beat the Zacks Consensus Estimate in two occasions, with an average beat of 0.17%. This is depicted in the graph below:

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

Factors to Consider

Alexandria focuses on Class A properties concentrated in urban campuses, primarily for the life science and technology entities. These locations are characterized by high barriers to entry and exit, and a limited supply of available space. This highly dynamic setting adds to the productivity and efficiency of the tenants, which in turn, ensures steady rental revenues for the company.

In the to-be-reported quarter too, the company is likely to enjoy high occupancy, driven by high demand for its properties in premium locations. In addition, it is likely to record healthy internal and external growth, solid cash flow and decent balance-sheet strength. However, a substantial development pipeline, currency fluctuations and stiff competition can adversely affect Alexandria’s bottom-line growth in the quarter under review.

Also, over the past 30 days, the Zacks Consensus Estimate of FFO per share for the second quarter remained unchanged at $1.50, reflecting lack of any solid catalyst for being overtly positive on the stock.

Earnings Whispers

Our proven model does not conclusively show that Alexandria will likely beat estimates this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. However, that is not the case here as you will see below.

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

Zacks ESP: The Earnings ESP for Alexandria is 0.00%. This is because the Most Accurate estimate of $1.50 matches the Zacks Consensus Estimate.

Zacks Rank: Alexandria’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

Stocks That Warrant a Look

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

CyrusOne Inc. CONE, likely to release earnings on Aug 2, has an Earnings ESP of +2.70% and a Zacks Rank #2.

Piedmont Office Realty Trust, Inc. PDM, expected to release earnings on Aug 2, has an Earnings ESP of +2.27% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

AvalonBay Communities, Inc. AVB, likely to release second-quarter numbers on Aug 2, has an Earnings ESP of +0.94% and a Zacks Rank #3.

Note: All EPS numbers presented in this write up 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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