Can EPR Properties (EPR) Pull A Surprise In Q3 Earnings?

EPR Properties (NYSE:EPR) is scheduled to report third-quarter 2016 results on Nov 3, after the closing bell.

The Zacks Consensus Estimate for third-quarter funds from operations (“FFO”) per share is currently pegged at $1.22.

This real estate investment trust (“REIT”) had reported a positive surprise of 0.86% in the previous quarter. It has, in fact, beaten the Zacks Consensus Estimate in three out of the trailing four quarters, with a positive average surprise of 1.76%. This is depicted in the graph below.

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

Factors to Consider This Quarter

EPR Properties is a specialty REIT that focuses on investments in properties across three primary market segments – Entertainment, Recreation and Education. The company has a diversified tenant base, which is expected to aid growth as well as drive third-quarter results.

Armed with solid demand for quality education and associated facilities as well as modest supply, we expect the company to gain substantially from its investments. Also, in the Entertainment segment, the company is projected to benefit from improved customer service at expanded amenity theatres, which has been driving footfall. Recreation segments also promise an impressive performance, led by solid demand for properties amid economic recovery on the back of job growth and improved wages.

However, third-quarter earnings are expected to be affected by higher expenses emanating from increased incentive compensation and higher professional fees. Also, in the entertainment segment, box office revenues are not likely to be robust as the prior year had a notable movie schedule, while the current year is anticipated to be a transition one.

Earnings Whispers

Our proven model does not conclusively show that EPR Properties will beat on earnings this quarter. 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. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP, which is the percentage difference between the Most Accurate estimate of $1.19 and the Zacks Consensus Estimate of $1.22, is -2.46%.

Zacks Rank: EPR Properties has a Zacks Rank #3. While a favorable rank increases the predictive power of ESP, a negative Earnings ESP makes surprise predictions difficult.

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.

Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Stocks to Consider

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

National Health Investors Inc. (NYSE:NHI) has an Earnings ESP of +1.61% and a Zacks Rank #3. The company will report results on Nov 7.

PennyMac Mortgage Investment Trust (NYSE:PMT) has an Earnings ESP of +13.16% and a Zacks Rank #2. The company is slated to release results on Nov 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Parkway, Inc. (NYSE:PKY) has an Earnings ESP of +28.89% and a Zacks Rank #3. The company is expected to declare results on Nov 7.

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.


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