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Federal Realty (FRT) to Post Q4 Earnings: What’s in Store?


Federal Realty Investment Trust FRT is set to report fourth-quarter and 2017 results after the market closes on Feb 13. Both its revenues and funds from operations (FFO) are anticipated to experience year-over-year growth.

Last quarter, this retail real estate investment trust (REIT) delivered a positive surprise of 2% with respect to FFO per share. Results indicated growth in revenues and FFO on a year-over-year basis.

The company has a decent surprise history having surpassed estimates in all the trailing four quarters. This resulted in an average positive surprise of 1.55%. The graph below depicts the surprise history of the company:

Federal Realty Investment Trust Price and EPS Surprise

Federal Realty Investment Trust Price and EPS Surprise | Federal Realty Investment Trust Quote

However, Federal Realty’s shares have descended 16.1% in the past six months, against the industry’s decline of 6.1%.

Let’s see how things have shaped up for this announcement.

Factors to Consider

Federal Realty has been taking advantage of the redevelopment opportunities. Particularly, amid a fast-evolving retail environment, the company is making strategic efforts to reposition, redevelop and re-merchandise its portfolio.

These efforts will not only help the company counter competition from e-retailers but will also enable it to post decent operating results in the to-be-reported quarter.

Subsequently, minimum rents from the retail and commercial segment will likely record year-over-year growth. The Zacks Consensus Estimate of $147 million indicates an encouraging growth of 4.6% as compared to the year-ago quarter. Furthermore, total rental income is projected to be $214 million, an increase of 6.5% from the prior-year tally.

However, rising consumer purchases through the Internet has emerged as a pressing concern for this REIT. These have made retailers reconsider their footprints and eventually opt for store closures. Also, retailers, not able to cope with competition, have been filing bankruptcies.

Accordingly, percentage rents, which indicate additional rent based on the level of sales achieved by the tenant, are predicted to witness a considerable decline due to the tepid retail environment. The Zacks Consensus Estimate of $3.34 million reflects a 7.4% rise as compared to the prior-year quarter.

Federal Realty’s activities during the quarter could not gain adequate analyst confidence. Consequently, the Zacks Consensus Estimate for Q4 FFO has edged down marginally to $1.47 in two months’ time. However, it indicates a rise of 1.4% year-over-year.

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $218.7 million, indicating a year-over-year improvement of 7.1%.

For full-year 2017, the Zacks Consensus Estimate for revenues stands at $851.5 million, reflecting a year-over-year rise of 6.2%. The consensus estimate for FFO per share is $5.91, reflecting a year-over-year increase of 4.6%. Management expects FFO per share in the range of $5.89-$5.92.

Earnings Whispers

Our proven model does not conclusively show that Federal Realty will likely beat on earnings this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. However, that is not the case here as you will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP for Federal Realty is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both are pegged at $1.47.

Zacks Rank: Federal Realty’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

Stocks That Warrant a Look

Here are a few stocks in the REIT space that you may want to consider, as our model shows that these have the right combination of elements to come up with a positive surprise this time around:

CubeSmart CUBE is slated to release fourth-quarter results on Feb 15. The stock has an Earnings ESP of +1.10% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

OUTFRONT Media OUT is scheduled to report quarterly numbers on Feb 27. The stock has an Earnings ESP of +0.90% and a Zacks Rank #3.

Extra Space Storage EXR, slated to release quarterly numbers on Feb 20, has an Earnings ESP of +0.23% and a Zacks Rank #3.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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