Real estate earnings on deck
Everyone expects solid numbers, but what about the forecasts?
By Billy Fisher
With the earnings season in full swing, the spotlight is about to shift to the commercial real estate space. In the coming days, some of the biggest companies will be checking in with their quarterly results. Here is what investors can expect from select heavy-hitters in the sector.
On Tuesday after the market close, AvalonBay Communities (AVB) is slated to announce its Q1 results. The company has said that it anticipates that its 2013 funds from operations (FFO) will decline by 19.4% due to the repayment of debt assumed from its Archstone acquisition.
AvalonBay has lagged the market so far this year, but that could be about to change.
The residential real estate investment trust (REIT) has met or slightly topped the expectations of analysts in each of its last four quarters. It has also succeeded in driving average rental rates higher at each of its established communities. AvalonBay's northern California properties have been particularly hot as rates ticked up by 9.4% in Q4 when compared to the prior year quarter. Investors have little to lose in buying this name ahead of earnings.
Another apartment REIT that will be reporting its earnings on Tuesday after the closing bell is Equity Residential (EQR). Wall Street is calling for the company to report EPS of $0.64 versus $0.61 in the prior year quarter. Total revenue is expected to spike by 7.3% on a year-over-year basis. The company’s stock price has faced struggles similar to those of AvalonBay, but for income investors, the 2.8% dividend yield remains attractive. Equity Residential also stands to benefit from its role in the Archstone deal, but the gains may take time before they will be fully reflected in the stock price.
One of the biggest players in the commercial real estate space will be reporting its Q1 results on Tuesday afternoon. Boston Properties (BXP) is expected to post an 8.0% increase in EPS on an 8.5% pop in total revenue versus its year-ago quarter.
I believe that this stock still has plenty of room to run. Boston Properties has seen its portfolio lease rate remain steady at 91.4% and it has been laying the groundwork to build out its footprint in the Washington, DC market. It has a 30% interest in a redevelopment project in Northwest DC that placed into service 232,000 net rentable square feet of class A office space this past fall. More recently, it acquired one of the last remaining development sites in the Reston Town Center which is located just outside of the nation’s capital. The company is also optimistic in its outlook as evidenced by its recent 18% dividend rate increase
One other real estate stock for investors to take note of in the coming days is Jones Lang LaSalle (JLL). After the close on Tuesday, the property management company is expected to weigh in with EPS of $0.23 compared to $0.50 in the prior year quarter. Total revenue is expected to rise by 3.9%. The company has seen its stock price run up to the tune of 21.0% over the course of the past year. It is a little too rich for my taste right now with a P/E of 21.0. Stay tuned though.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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