Will Federal Realty (FRT) Q3 Earnings Disappoint Investors?

Federal Realty Investment Trust (NYSE:FRT) is set to report third-quarter 2016 results after the market closes on Nov 2. Last quarter, this retail real estate investment trust (“REIT”) had delivered a positive surprise of 0.71%.

Federal Realty has beat estimates in three out of four trailing quarters, with a positive average surprise of 0.55%. This is depicted I the chart below.

The Zacks Consensus Estimate for third-quarter funds from operations (“FFO”) is currently pegged at $1.42.

FED RLTY INV Price and EPS Surprise

FED RLTY INV Price and EPS Surprise | FED RLTY INV Quote

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

Factors to Consider

Federal Realty’s portfolio of premium retail assets – mainly situated in the major coastal markets from Washington, D.C. to Boston and San Francisco and Los Angeles – along with a diverse tenant base, positions it well for decent growth.

However, in the third quarter, the company is anticipated to have experienced anchor rollover drag. Same store metrics, including occupancy levels, are likely to experience deceleration for the Sports Authority bankruptcy and anchor rollover timing, while the company is also projected to have incurred incremental expense for debt.

Earnings Whispers

Our proven model does not conclusively show that Federal Realty will beat on earnings 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 #3 (Hold) for this to happen. However, that is not the case here as you will see below.

Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% as both the estimates are currently pegged at $1.42.

Zacks Rank: Federal Realty currently has a Zacks Rank #4 (Sell).

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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