HCP Inc. (HCP) is set to report its first-quarter 2014 results on May 6, 2014, before the opening bell. In the prior quarter, it delivered a positive earnings surprise of 2.70%. Also, this healthcare real estate investment trust (REIT) has posted an average positive earnings surprise of 1.35% over the past four quarters, beating the Zacks Consensus Estimate in 3 of the last 4 quarters.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Improving fundamentals in the healthcare REIT market, a well-balanced, diversified portfolio, opportunistic acquisitions along with a decent balance sheet place HCP on the growth trajectory. Specifically, the implementation of the Affordable Care Act and the associated increase in healthcare spends as well as the aging population, provide ample opportunity for HCP, which offers real estates supporting healthcare facilities, to grow and enhance profitability.
However, for a number of its tenants and operators, one of the key sources of revenues is the governmental healthcare programs such as the Federal Medicare program and state Medicaid programs and non-governmental payors. This is a concern as in the recent years governmental payors have reduced payments to healthcare providers due to budgetary pressures. Also, cut-throat competition remains a challenge for this company.
Earnings Whispers
Our proven model does not conclusively shows that HCP is likely to beat the Zacks Consensus Estimate in the upcoming quarter.
To beat the estimate, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Zacks ESP: The Earnings ESP for HCP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 74 cents per share.
Zacks Rank: HCP’s Zacks Rank #3 (Hold) increases the predictive power of ESP. Nevertheless, we need to have a positive ESP as well to be confident about an earnings surprise call.
Other Stocks to Consider
Here are some other REITs you may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter. All of these companies are slated to report on May 7.
Strategic Hotels & Resorts, Inc. (BEE), with an Earnings ESP of +83.3% and a Zacks Rank #2.
Regency Centers Corporation (REG), with an Earnings ESP of +1.54% and a Zacks Rank #3.
Kimco Realty Corp. (KIM), with an Earnings ESP of +2.94% and a Zacks Rank #3.
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