Is UDR Inc. (UDR) Poised For A Beat This Earnings Season?

Residential real estate investment trust (“REIT”) UDR, Inc. (NYSE:UDR) is scheduled to report second-quarter 2016 results on Jul 26, after the market closes.

Last quarter, the Denver, CO-based REIT reported in-line results. UDR boasts an average beat of 0.61% for the trailing four quarters. For second-quarter 2016, the company expects funds from operations (“FFO”) per share in the range of 43–45 cents. The Zacks Consensus Estimate for first-quarter FFO per share is currently pegged at 44 cents.

Let’s see how things are shaping up for this announcement.

UDR INC Price and EPS Surprise

UDR INC Price and EPS Surprise | UDR INC Quote

Factors to Consider

UDR has a vast experience in the residential real estate market. The company is expected to benefit from the strengthening multifamily fundamentals and favorable demographic trends. In fact, there is a demand for rental apartments from both new millennial households and empty-nesters. Coupled with this, the improving job market is driving demand for apartments. As such, UDR is expected to experience growth in same-store net operating income in the second quarter.

But supply is increasing and the company has already started to feel its impact. In fact, significant rent growth in the past made New York and San Francisco markets the most preferred ones among developers and landlords. As a result, in recent times, new construction activity soared in these markets. However, this elevated supply of new units curtailed landlords’ capability to demand more rents. This could lead to a pressure on occupancy while rent escalations might be limited.

Earnings Whispers?

Our proven model does not conclusively show that UDR will beat 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 #3 (Hold) for this to happen. However, that is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 44 cents. This leads to an Earnings ESP of 0.00% for UDR, which represents the percentage difference between the two.

Zacks Rank: UDR currently has a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% makes our surprise prediction difficult.

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.

Other Stocks That Warrant a Look

Here are a few stocks in the REIT sector you may want to consider, as our model shows that they have the right combination of elements to post a positive surprise this quarter:

American Campus Communities, Inc. (NYSE:ACC) has an Earnings ESP of +1.89% and a Zacks Rank #2. The company will report results on Jul 25.

Taubman Centers, Inc. (NYSE:TCO) has an Earnings ESP of +7.22% and a Zacks Rank #2. The company will release results on Jul 28.

Regency Centers Corp. (NYSE:REG) has an Earnings ESP of +1.25% and a Zacks Rank #3. The company will release results on Aug 2.


Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. All earnings per share numbers presented in this write up represent FFO per share.