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Federal Realty (FRT) to Post Q2 Earnings: What's in Store?

Federal Realty Investment Trust FRT is set to report second-quarter 2017 results after the market closes on Aug 2.

Last quarter, this retail real estate investment trust (“REIT”) delivered a positive surprise of 1.40% with respect to funds from operations (“FFO”) per share. Results reflect growth in revenues.

Over the trailing four quarters, the company surpassed estimates on three occasions and missed in the other period. This resulted in an average positive surprise of 0.53%. The graph below depicts the surprise history of the company.

Note: The EPS numbers presented in the above chart represent funds from operations (“FFO”) per share.

However, Federal Realty’s shares have descended 6.5% year to date, against the industry’s loss of 4.2%.

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

Factors to Consider

Federal Realty’s portfolio of premium retail assets – mainly situated in the major coastal markets from Washington, D.C. to Boston, San Francisco and Los Angeles – along with a diverse tenant base, positions it well for decent growth.

Particularly, amid a fast changing retail environment, the company is making concerted efforts to reposition, redevelop and re-merchandise its portfolio. This includes an upgrade of the tenant mix. Such efforts are a strategic fit for the long term. However, their short-term adverse impact on occupancy and net operating income cannot be bypassed.

Moreover, mall traffic continues to dwindle amid a rapid shift in customers’ shopping preferences, with non-store sales rising considerably. This has led to significant store closures and retailers’ bankruptcy, thereby adversely marring demand for retail real estate space. This choppy retail real estate environment is anticipated to adversely affect the company’s performance in Q2.

Hence, prior to the second-quarter earnings release, there is lack of any solid catalyst for becoming overtly optimistic about the company’s business activities and prospects. As such, the Zacks Consensus Estimate of FFO per share for the to-be-reported quarter remained unchanged at $1.46 over the past 60 days.

Earnings Whispers

Our proven model does not conclusively show that Federal Realty will likely beat on earnings 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 Federal Realty is 0.00%. This is because the Most Accurate estimate of $1.46 matches the Zacks Consensus Estimate.

Zacks Rank: Federal Realty’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.

Boston Properties, Inc. BXP, likely to release second-quarter numbers on Aug 1, has an Earnings ESP of +0.62% and a Zacks Rank #3.

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.

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Federal Realty Investment Trust (FRT): Free Stock Analysis Report
Boston Properties, Inc. (BXP): Free Stock Analysis Report
Piedmont Office Realty Trust, Inc. (PDM): Free Stock Analysis Report
CyrusOne Inc (CONE): Free Stock Analysis Report
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