Duke Realty (DRE) To Post Q3 Earnings: What's In Store?

Duke Realty Corp. (NYSE:DRE) is scheduled to release third-quarter 2017 results on Oct 25, after the market closes.

Last quarter, this commercial real estate investment trust (REIT) delivered a positive earnings surprise of 6.7%. Results were backed by improved operational performance from increased occupancy and rental-rate growth.

The company exceeded the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being nearly 5.9%. The graph below depicts this surprise history:

Duke Realty Corporation Price and EPS Surprise

Further, Duke Realty’s shares have climbed 8.6% year to date, outperforming the industry’s gain of 4.8%.

Note: All EPS numbers presented here represent funds from operations (FFO) per share.

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

Factors That Might Influence Q3 Results

In recent years, Duke Realty has made strategic efforts to enhance its industrial portfolio. This augurs well because the industrial-asset category has been grabbing attention as it is experiencing high demand, with the economy and job market displaying signs of recovery and the manufacturing environment remaining healthy.

Furthermore, higher demand from e-commerce customers, third-party logistic providers and traditional warehousing customers also resulted in high demand for distribution centers. Given Duke Realty’s solid capacity to offer modern, bulk distribution properties, the company remains well poised to capitalize on this trend in the third quarter as well.

Moreover, Duke Realty is making concerted efforts to lower its suburban office assets and turn into a leading domestic pure-play industrial REIT. Subsequently, in the second quarter, the company generated $2.45 billion in proceeds by selling its medical office building (MOB) portfolio for $2.8 billion. This residual transaction is likely to be reflected in the to-be-reported quarter.

While such streamlining efforts are strategic fit for the long term, the near-term dilutive effect cannot be bypassed. In fact, such short-term impact will likely drag the company’s quarterly results.

Over the past two months, the Zacks Consensus Estimate of funds from operations (FFO) per share for the quarter to be reported remained unchanged at 29 cents, reflecting lack of any solid catalyst.

Earnings Whispers

Our proven model does not conclusively show that Duke Realty will likely beat estimates 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 Duke Realty is -3.93%.

Zacks Rank: Duke Realty has a Zacks Rank #3. This 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 sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

CoreSite Realty Corporation (NYSE:COR) , slated to release third-quarter results on Oct 26, has an Earnings ESP of +1.01% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cousins Properties Inc. (NYSE:CUZ) , scheduled to report quarterly numbers on Oct 25, has an Earnings ESP of +1.13% and a Zacks Rank of 3.

Boston properties, Inc. (NYSE:BXP) , slated to release third-quarter earnings on Nov 1, has an Earnings ESP of +0.39% and a Zacks Rank of 3.

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.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>