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HCP Inc (HCP) Q1 Earnings: Will it Pull Off a Surprise?

HCP Inc. HCP is slated to report first-quarter 2017 results on May 2, before the opening bell.

Last quarter, this healthcare real estate investment trust (REIT) delivered a positive earnings surprise of 3.51% in terms of funds from operations (FFO) per share. The company exceeded estimates in three of the trailing four quarters and met estimate once. This resulted in an average positive surprise of 2.66%. The Zacks Consensus Estimate for the first-quarter FFO per share is currently pegged at 48 cents.

This is depicted in the graph below.

HCP, Inc. Price and EPS Surprise

HCP, Inc. Price and EPS Surprise | HCP, Inc. Quote

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

Why a Likely Positive Surprise?

Our proven model shows that HCP Inc. is likely to beat on estimates this time around 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 HCP Inc. has the right mix.

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

Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate estimate of 49 cents and the Zacks Consensus Estimate of 48 cents, is +2.08%. This is a meaningful indicator of a likely positive surprise.

Zacks Rank: HCP Inc. carries a Zacks Rank #3. This makes us reasonably confident of a positive surprise this season.

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

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

HCP maintains a diverse and balanced portfolio in the healthcare sector. The company is likely to gain in the to-be-reported quarter from rising healthcare spending and a growing aging population. Further, strategic investments, tie-ups and acquisitions are anticipated to drive decent cash flows.

However, growth might be adversely affected by cut-throat competition in its markets. Additionally, there is increased supply in certain healthcare asset categories.

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 they have the right combination of elements to post an earnings beat this quarter.

EPR Properties EPR, expected to release earnings on May 2, has an Earnings ESP of +0.84% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

STORE Capital Corporation STOR, expected to release first-quarter results on May 4, has an Earnings ESP of +2.44% and a Zacks Rank #3.

Hudson Pacific Properties, Inc. HPP, expected to release first-quarter results on May 4, has an Earnings ESP of +2.08% 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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