Will EPR Properties (EPR) Pull A Surprise In Q2 Earnings?

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

Though, this real estate investment trust (“REIT”) reported an in-line result in the prior quarter, it has, in fact, beaten the Zacks Consensus Estimate in three out of the trailing four quarters, with a positive average surprise of 2.02%. The Zacks Consensus Estimate for second-quarter funds from operations (“FFO”) per share is currently pegged at $1.16.

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 $1.18 and the Zacks Consensus Estimate of $1.16, is +1.72%. This is a major indicator of a likely positive surprise.

Zacks Rank: EPR Properties carries a Zacks Rank #3.

The combination of EPR Properties’ Zacks Rank #3 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 expected to notably drive its second-quarter results.

The Entertainment segment is expected to benefit well from the growth in the millennial segment. This is because millennials account for 50% of the frequent moviegoers and this age cohort is growing. In fact, now they constitute the largest population segment. Further, the company is projected to benefit from improved customer service at expanded amenity theatres, which has been boosting footfall and pushing up food and beverage spend.

Moreover, with an economic recovery backed by job growth, Recreation segment also promises an impressive performance, led by solid demand for properties. Finally, bolstered by healthy demand for quality education and associated facilities amid modest supply, EPR Properties is well poised to gain significantly from its investments in the Education segment and experience growth in enrollment.

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:

Ashford Hospitality Prime, Inc. (NYSE:AHP) has an Earnings ESP of +6.15% and a Zacks Rank #3. The company will release results on Aug 3.

ARMOUR Residential REIT, Inc. (NYSE:ARR) has an Earnings ESP of +2.86% and a Zacks Rank #3. The company is expected to release results on Aug 3.

National Health Investors Inc. (NYSE:NHI) has an Earnings ESP of +0.83% and a Zacks Rank #2. The company will report results on Aug 5.


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.