REITs’ Q4 Earnings to Watch on Feb 2: AIV, ESS, KIM & DCT

There has been a flurry of releases in the real estate investment trust (“REIT”) sector this week. A couple of important companies from this sector which have already reported their results last week are Prologis, Inc. PLD and SL Green Realty Corp. SLG. While SL Green’s performance missed expectations, Prologis reported in-line results.

Some REITs, belonging to different sub-categories, which are slated to report results on Feb 2 are Apartment Investment and Management Company AIV, Essex Property Trust, Inc. ESS, Kimco Realty Corporation KIM and DCT Industrial Trust Inc. DCT.

The fourth-quarter 2016 witnessed many major developments in the REIT sector. During the first half of the quarter, high chances of a rate hike and political uncertainty sent the bond yields soaring. Eventually, in mid-December, the U.S. Federal Reserve raised the key interest rates by 25 basis points to the range of 0.50–0.75%, the second hike since Dec 2015.

However, interest rates are still very low. According to the National Association of Real Estate Investment Trusts, despite the rise in rate, the REITs are likely to show improved performance with robust equity issuance and low debt ratios.

Also, a tightening monetary policy indicates economic strength, augmenting the likelihood of an increase in rent and occupancy levels. This, in turn, leads to a healthy net operating income expansion. All these factors benefit REITs and may neutralize the impact of a high rate of interest.

In fact, per a study by the commercial real estate services firm CBRE Group Inc. CBG, the U.S. economy is gradually gaining strength. In Dec 2016, wages increased 2.9% year over year, the highest in seven years. This growth trend is expected to continue in 2017.

Let’s have a look at what’s in store for the three REITs set to release their fourth-quarter results tomorrow:

For doing this, we rely on the Zacks methodology, combining a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) – and a positive Earnings ESP, to predict the chances of a beat this quarter. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Per our proprietary methodology, Earnings ESP shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Research shows that with this combination of rank and ESP, chances of a positive earnings surprise are as high as 70% for the stocks.

Denver, CO-based Apartment Investment and Management Company – commonly known as Aimco is expected to report its results after market close. The company has an Earnings ESP of 0.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here. Our model does not conclusively predict that the company will record a positive surprise (read more: What's in the Cards for Aimco this Earnings Season?).

Essex Property Trust is a San Mateo, CA-based residential REIT which has an Earnings ESP of -0.36% and a Zacks Rank #3. Our proven model does not conclusively show that the company is likely to post a positive surprise this quarter (read more: Essex Property Q4 Earnings: What's in the Cards?).

New Hyde Park, NY-based Kimco is expected to report its results after market close. The company has an Earnings ESP of -2.63% and a Zacks Rank #3. Our model does not conclusively predict that the company will record a positive surprise (read more: Kimco Realty to Report Q4 Earnings: What's in Store?).

Denver, CO-based DCT Industrial Trust expected to report its results after market close. The company has an Earnings ESP of 0.00% and a Zacks Rank #2. Our model does not conclusively predict that the company will record a positive surprise.

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