We expect SL Green Realty Corp. SLG to beat earnings estimates when it reports third-quarter 2015 results on Oct 21 after the market closes.
Last quarter, this NY-based real estate investment trust (“REIT”) delivered a 6.45% positive surprise. The Zacks Consensus Estimate for third-quarter is currently pegged at $1.56.
Why a Likely Positive Surprise?
Our proven model shows that SL Green has the right combination of two key ingredients for an earnings beat.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.92%. This is a very meaningful and leading indicator of a likely positive earnings surprise for the company.
Zacks Rank: SL Green carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 have a significantly higher chance of beating earnings. Conversely, the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
What is Driving the Better Than Expected Earnings?
SL Green has been following an opportunistic investment policy to boost its overall portfolio. This includes investment in long-term core properties, opportunistic assets, and debt and preferred equities. Also, in order to facilitate such investments, SL Green continues to divest non-core assets. In sync with this strategy, the company completed several transactions in the second quarter, and continued with such activities in the third quarter as well.
SL Green’s combined same-store cash net operating income rose 4.9% year over year in second-quarter 2015; while for the first 6 months, it increased 4% year over year. Considering the company’s performance in first-half 2015 and its outlook for rest of the year, it raised the guidance for funds from operations (“FFO”) to a range of $6.30–$6.34 per share from the previous projection of $6.24–$6.30 per share.
Stocks to Consider
You could consider other REIT stocks that have the combination of a positive Earnings ESP and a favorable Zacks Rank, and are hence poised for an earnings beat this quarter:
Digital Realty Trust Inc. DLR has an Earnings ESP of +2.34% and a Zacks Rank #2. The company will report third-quarter results on Oct 29.
Hospitality Properties Trust HPT has an Earnings ESP of +1.08% and a Zacks Rank #2. The company is slated to report third-quarter results on Nov 3.
Acadia Realty Trust AKR has an Earnings ESP of +2.86% and a Zacks Rank #3. The company will report third-quarter results on Nov 3.
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