EPR Properties' (EPR) Q4 Earnings: A Beat In The Cards?

EPR Properties (NYSE:EPR) is scheduled to report fourth-quarter 2016 results on Feb 28, after the closing bell.

This real estate investment trust (“REIT”) delivered a positive surprise in the prior quarter. In fact, it has beaten the Zacks Consensus Estimate in three out of the trailing four quarters, with a positive average surprise of 0.85%.

The Zacks Consensus Estimate for fourth-quarter funds from operations (“FFO”) per share is currently pegged at $1.23.

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

Why a Likely Positive Surprise?

Our proven model shows that EPR Properties is likely to beat estimates because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates, and EPR Properties has the right mix.

Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate estimate of $1.25 and the Zacks Consensus Estimate of $1.23, is +1.63%. This is a major indicator of a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: EPR Properties carries a Zacks Rank #2.

The combination of EPR Properties’ favorable Zacks Rank and positive ESP makes us reasonably confident of a positive surprise this season.

Conversely, we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

What's Driving the Better-than-Expected Earnings?

EPR Properties is a specialty REIT that focuses on investments in properties across three primary market segments – Entertainment, Recreation and Education. Strategic investment in each of its segments and a diversified tenant base are likely to significantly boost fourth-quarter results. In fact, upbeat consumer confidence and an improving economy are expected to drive the company’s performance.

Segment wise, growth in the millennial generation is anticipated to benefit the Entertainment segment. This is because millennials constitute the major chunk of frequent moviegoers and this age cohort has been growing considerably. In addition, the company is likely to gain from improved customer service at expanded amenity theatres, which has been boosting footfall, and pushing up food and beverage spend as well.

Moreover, with an economic recovery backed by job growth, the Recreation segment promises an impressive performance, led by solid demand for properties. Further, EPR Properties is well poised to benefit from investments in the Education segment and experience growth in enrollment as there is a healthy demand for quality education, and associated facilities amid modest supply.

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:

Lexington Realty Trust (NYSE:LXP) has an Earnings ESP of +4.17% and a Zacks Rank #3. The company will release results on Mar 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Terreno Realty Corporation (NYSE:TRNO) has an Earnings ESP of +4.00% and a Zacks Rank #3. The company is expected to report results around Mar 1.

Other Key Pick

Investors interested in the REIT industry may also consider another stock – Urban Edge Properties (NYSE:UE) – which has a Zacks Rank #2 (Buy).

Notably, the Zacks Consensus Estimate for Urban Edge Properties’ funds from operations (FFO) per share for 2017 of $1.37 reflects growth of 7.9% from the prior year.

Note: All earnings per share numbers presented in this write up represent Funds from Operations (“FFO”) per share. 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.

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