Real Estate Investment Trusts (REITs) managed to pull off a decent performance this year. The FTSE NAREIT All REITs Index has gained 39.1% since the beginning of the year through Dec 29, outperforming the S&P 500 Index’s growth of 29.41%, as recovery in the economy translated into greater demand for the real estate.
The REIT sectors, namely data centers, infrastructure and industrial REITs, which support the digital economy, have continued to prosper so far, while the social-distancing-sensitive sectors have experienced a rebound.
With growth in cloud computing, the Internet of Things and big data, and an increasing number of companies opting for third-party IT infrastructure, data-center REITs are experiencing a boom in the market. Also, the tower REITs continue to witness high demand amid an increase in mobile data usage, spectrum availability and high network investments by wireless carriers. The wireless data consumption is likely to increase considerably over the next several years and therefore the constituents of these sectors have a chance to succeed.
Additionally, demand for self-storage space has increased owing to the flexible working environment and the improving housing market while move-outs remain low amid the prevalent health crisis, supporting occupancy levels.
Industrial REITs prove to be a great beneficiary of the e-commerce flourish and the supply-chain strategy transformations. Along with the fast adoption of e-commerce, the logistics real estate is anticipated to gain from a rise in inventory levels. The sector witnessed total returns of 57% since the beginning of the year through November 2021.
Recovery in the economy and relaxation of the coronavirus-related restrictions are aiding the rebound in the advertising environment. The out-of-home (OOH) advertising is evolving rapidly and continues to increase its market share compared with the other forms of media. In the upcoming years, higher technology investments are expected to further provide a cushion to OOH advertising.
Moreover, the chosen stocks must be consistent performers as the long-term value of a company is not affected by its short-term instability. With economic indicators exhibiting a recovery trend since the pandemic and the market dynamics of individual asset categories play a pivotal role in REITs’ operating performance, there is immense scope for growth.
Stock Picks
Here we handpicked five REITs that are poised to continue their winning streaks in 2022, using the Zacks Screener. Besides having solid fundamentals, these REITs hold a top Zacks Rank, indicating high chances of market outperformance over the next 1-3 months. These stocks are witnessing estimate revisions too, indicative of analysts’ bullish sentiment surrounding the same.
Boston, MA-based American Tower (NYSE:AMT) Corporation AMT is an independent operator of wireless communications towers. Its extensive and geographically-diversified communication real-estate portfolio is well-poised to benefit from the increasing capital spending by wireless carriers due to 5G deployments and the future deployment of an additional spectrum.
Recently, American Tower announced the completion of the acquisition of CoreSite Realty Corporation. The move offers American Tower the opportunity to capitalize on the latter's highly interconnected data center facilities and critical cloud on-ramps.
American Tower currently has a Zacks Rank #2 (Buy). Shares of AMT have gained 28.7%, outperforming the S&P’s growth of 28.4% in the year so far. In addition, the stock has seen the Zacks Consensus Estimate for both 2021 and 2022 funds from operations (FFO) per share being revised marginally north to $9.49 and $10.32 in a month’s time, respectively.
Prologis (NYSE:PLD) Inc. PLD is a leading industrial REIT that acquires, develops, operates and manages industrial properties in the United States and worldwide. PLD continues to benefit from the scale of its platform.
This industrial REIT behemoth’s performance in the recent quarters reflects robust demand for its properties, an increase in market rents and low vacancies. Given Prologis’ capacity to offer high-quality facilities in the key markets and a robust balance sheet, it is well poised to bank on these trends.
Prologis has a Zacks Rank of 2 at present. Shares of the industry player have gained 68.2%, outperforming the S&P’s growth of 28.4% in the year so far. Additionally, the stock has seen the Zacks Consensus Estimate for both 2021and 2022 FFO per share being revised marginally north in two months’ and a month’s time, respectively, to $4.12 and $4.62.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Houston-based Crown Castle International (NYSE:CCI) Corp. CCI is a leading independent operator of wireless communication towers in the United States. Given its ability to offer a holistic network solution with towers, fiber and small cells plus ample liquidity, Crown Castle is well poised to grow, banking on these trends.
CCI currently carries a Zacks Rank of 2. Shares of Crown Castle have gained 30.2%, outperforming the S&P’s growth of 28.4% so far in the year. In addition, the stock has seen the Zacks Consensus Estimate for 2021 and 2022 FFO per share being revised marginally north in three months’ and a month’s time to $6.89 and $7.37 respectively.
Located in Salt Lake City, UT, Extra Space Storage (NYSE:EXR) Inc. EXR is a notable name in the self-storage industry. This REIT is focused on expanding through accretive acquisitions, mutually beneficial joint-venture partnerships and a third-party management platform.
Shares of this currently Zacks #2 Ranked EXR have gained 94.5%, outperforming the S&P’s growth of 28.4% in the year so far. The consensus estimate for its 2021and 2022 FFO per share has moved up 1.1% and 2.1% to $6.86 and $7.68 over the past month, respectively.
Headquartered in New York, OUTFRONT Media Inc. OUT is a leading provider of OOH advertisement space in the key markets throughout the United States and Canada. With a diversified portfolio, both geographical and industry wise, OUT is well poised to gain from its improving billboard business, backed by a solid presence in the key markets and an improving industry.
Shares of OUTFRONT Media have gained 34.4%, outperforming the S&P’s growth of 28.4%, in the year so far. OUT currently sports a Zacks Rank #1(Strong Buy) . The stock has seen the Zacks Consensus Estimate for 2021 and 2022 FFO per share being revised 13.8% and 6.1% upward in the past two months.
Here’s how the above stocks have performed in the year so far.
Image Source: Zacks Investment Research
Note: Anything related to earnings presented in this write-up represent FFO — a widely used metric to gauge the performance of REITs.
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American Tower Corporation (AMT): Free Stock Analysis Report
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