HCP Inc. HCP is slated to report second-quarter 2015 results on Aug 4, before the closing bell.
This healthcare real estate investment trust (“REIT”) has beaten the Zacks Consensus Estimate in two of the trailing four quarters with an average beat of 0.64%. The Zacks Consensus Estimate for the second quarter is currently pegged at 76 cents per share.
Is the company poised for a winning quarter? Let’s see how things are shaping up prior to this announcement.
Factors to Consider
We expect HCP to benefit from its diversified portfolio, rising healthcare spending and a growing aging population. Net operating income (NOI) is expected to grow backed by the company’s strong fundamentals. Moreover, strategic investments, tie-ups and acquisitions are expected to drive decent cash flows.
Importantly, during the quarter HCP closed the acquisition of 35 private-pay senior housing communities for $847 million. The acquisition of this portfolio from Chartwell Retirement Residences, the Ontario, Canada-based REIT, is expected to enhance HCP’s top line, going forward.
However, growth may be hindered by cut-throat competition in its markets. Moreover, dependency on a limited number of operators poses risk. Overall, HCP’s performance during the quarter was inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate has remained unchanged at 76 cents over the last 30 days.
Earnings Whispers
Our proven model does not conclusively show that HCP will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate and the Zacks Consensus Estimate currently stand at 76 cents. This translates into an Earnings ESP of 0.00%.
Zacks Rank: HCP’s Zacks Rank #3, when combined with 0.00% Earnings ESP, makes a surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Other Stocks to Consider
Here are some stocks in the REIT industry that you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:
Ashford Hospitality Trust, Inc. AHT carries a Zacks Rank #1 and has an Earnings ESP of +4.35%. It is scheduled to report results on Aug 6.
CubeSmart CUBE has an Earnings ESP of +6.90% and a Zacks Rank #2. The company is slated to release results on Aug 6.
Hudson Pacific Properties, Inc. HPP carries a Zacks Rank #3 and has an Earnings ESP of +2.44%. It is scheduled to report results on Aug 6.
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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