The Q3 earnings for the real estate investment trusts (“REITs”) is set to kick-start on Oct 19. Important REITs which are expected to release tomorrow are SL Green Realty Corp. SLG, EastGroup Properties Inc. EGP, LaSalle Hotel Properties LHO and Brandywine Realty Trust BDN.
During the quarter, speculations on a possible rate hike did rounds in the market, affecting the highly rate-sensitive sectors like real estate investment trust (“REIT”). Though, during the first half of the quarter the economic growth continued, it lost momentum soon after. Also, the inflation figure could not gather the strength necessary for an unhesitant approach toward a tight monetary policy. Further, global economic concerns acted as a dampener in the rate hike mood.
During the end of the quarter, the hawkish statements by the Fed officials paved the way for a rate increase. However, the fragile economic data as well as slowdown in job growth and manufacturing activity, took the hawkish rhetoric away.
REITs not only benefit from an uptick in economic activity and job growth, but also gain from an appreciation in the value of the real estate assets they hold. Therefore, as long as rate hikes are backed by improving economy, REIT investors can keep their worries about the short-term impact on the borrowing costs at bay.
In fact, gains in employment and growth in wages actually translates to increased buying power as well as improved spending trends. Further, when economic activity gathers steam, demand for space automatically grows.
Let’s have a look at what’s in store for four REITs mentioned above:
SL Green is slated to report third-quarter 2016 results after the market closes on Oct 19. The company has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). Our model does not conclusively predict that the company will record a positive surprise. This is because it lacks the right combination of the two key ingredients – a positive Earnings ESP (the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3. (Read more: SL Green's Q3 Earnings Preview: What's in Store?)
EastGroup Properties is a Jackson, MS-based REIT has an Earnings ESP of 0.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here. Our proven model does not conclusively show that Brandywine Realty is likely to post a positive surprise this quarter.
Bethesda, MD-based LaSalle Hotel Properties has an Earnings ESP of -1.15% and a Zacks Rank #4 (Sell). Note that, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Radnor, PA-based Brandywine Realty has an Earnings ESP of 0.00% and a Zacks Rank #3. Our proven model does not conclusively show that Brandywine Realty is likely to post a positive surprise this quarter.
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