REITs Q2 Earnings To Watch For On Jul 29: CHSP, OFC, HST, VTR

We are approaching the end of one of the busiest weeksin the current reporting cycle. This week has been full of activity for the real estate investment trusts (REITs) also.

Several big shots including Avalonbay Communities Inc. (NYSE:AVB) and Simon Property Group Inc. (NYSE:SPG) have come up with their earnings releases this week and now we have another chunk of REITs that are slated to report their result on Friday, Jul 29. Among them are Chesapeake Lodging Trust (NYSE:CHSP) , Corporate Office Properties Trust (NYSE:OFC) , Host Hotels & Resorts, Inc. (NYSE:HST) and Ventas, Inc. (NYSE:VTR) .

So far, the earnings season has delivered a mixed performancefrom the REITs’ point of view. While top-notch companies like Prologis, Inc. (NYSE:PLD) , SL Green Realty Corp. (NYSE:SLG) and Boston Properties Inc. (NYSE:BXP) came up with better-than-expected performances; results in the residential sector have not been much impressive.

Nevertheless, REITs broadly benefit from the low-rate environment for their high debt-dependence nature. Hence, the Federal Reserve’s decision to keep the rate hike on hold in July’s meeting comes as a boon. But with REITs catering to different asset classes, individual market dynamics of the underlying asset category play a pivotal role in defining their performance.

While CBRE Group’s (NYSE:CBG) study of retail, industrial and office-market fundamentals in Q2 have revealed stability and strength, not all REITs are equally poised to surpass this season. Therefore, we relied 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.

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.

Let’s now check how the following four companies are expected to perform, when they report their second-quarter 2016 results on Jul 29.

Chesapeake Lodging Trust is a hotel REIT focused on investments in upper, upscale hotels in business, airport, convention markets, and select-service hotels in urban settings or locations in the U.S. The company has an Earnings ESP of -1.33% and a Zacks Rank #3. Despite a favorable Zacks Rank, the stock’s negative ESP lowers its chances of a beat this quarter.

CHESAPEAKE LODG Price and EPS Surprise

CHESAPEAKE LODG Price and EPS Surprise | CHESAPEAKE LODG Quote

Corporate Office Properties Trust is an office REIT that specializes in acquiring, developing, owning, leasing and managing high quality office and data center properties. The company has an Earnings ESP of 0.00%. Although the stock’s Zacks Rank #3 increases the predictive power of ESP, its zero ESP makes surprise prediction difficult.

CORP OFFICE PTY Price and EPS Surprise

CORP OFFICE PTY Price and EPS Surprise | CORP OFFICE PTY Quote

Host Hotels & Resorts, Inc. is a hotel REIT that currently owns or holds controlling interests in upper, upscale and luxury hotel properties primarily operated under premium brands. The company has an Earnings ESP of +2.04%. This is a major indicator of a likely positive surprise. Moreover, it has a Zacks Rank #3. This combination of Host Hotels’ Zacks Rank #3 and positive ESP makes us reasonably confident of a positive surprise this season.

Host Hotels is anticipated to grow its revenue per available room (RevPAR) in 2016 from that of 2015 through value enhancement and rebranding initiatives. Further, the company stands to gain from the strength in employment & business investments as well as its strategic capital-recycling program. The company is likely to perform well, also due to lower supply and less disruptions. In addition, adequate liquidity and a decent balance sheet are expected to support second-quarter 2016 results (read more: Host Hotels Set to Beat on Q2 Earnings: Stock to Gain?).

HOST HOTEL&RSRT Price and EPS Surprise

HOST HOTEL&RSRT Price and EPS Surprise | HOST HOTEL&RSRT Quote

Ventas is a healthcare REIT that has a large and diversified portfolio in the healthcare sector with exposure to all types of facilities. The company has an Earnings ESP of 0.00% and a Zacks Rank #2. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% makes our surprise prediction difficult.

The company’s diversified portfolio allows it to capitalize on a wide range of opportunities. Amid increasing healthcare spending, aging population and a rise in insured individuals, it is expected to see a top-line boost in the to-be-reported quarter.However, in recent times, Ventas has undertaken a spate of acquisition and redevelopment activities. Though beneficial over the long term, such activities entail huge expenses that will affect the company’s near-term performance to some extent (read more: Ventas Q2 Earnings: What's in the Cards for the Stock?).

VENTAS INC Price and EPS Surprise

VENTAS INC Price and EPS Surprise | VENTAS INC Quote

Stay tuned! Check back on our full write-up on earnings releases of these stocks.

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