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Gaming and Leisure Properties (GLPI) Q4 Earnings Preview

Gaming and Leisure Properties, Inc. GLPI is slated to report fourth-quarter and full-year 2018 results on Feb 13, before market open. The company’s performance is likely to reflect a year-over-year increase in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Wyomissing, PA-based first gaming-focused real estate investment trust (REIT) delivered a negative surprise in terms of funds from operations (FFO) per share. Results reflected lower-than-expected revenues in the quarter.

For the trailing four quarters, Gaming and Leisure Properties has a mixed surprise history, having beaten estimates in one occasion, met in another and missed in the other two, recording average negative surprise of 0.55%. The graph below depicts this surprise history:

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

Factors at Play

Gaming and Leisure Properties has a geographically diversified real estate company focused on ownership of gaming facilities. In the to-be-reported quarter, the company is expected to have generated stable and predictable cash flow from long-term triple-net master leases with significant fixed components. Further, the company is planning to enhance its portfolio by aggressively seeking scopes to acquire gaming facilities to be leased to gaming operators.

Particularly, the company witnessed a remarkable fourth quarter, announcing the completion of its acquisition of the real property assets of Tropicana Entertainment Inc. on Oct 1. In addition, during the middle of the same month, the company announced the conclusion of the transactions associated with the buyout of Pinnacle Entertainment, Inc. by Penn National Gaming, Inc. PENN.

These transactions have enhanced and diversified the company’s geographic footprint and tenant roster, and are immediately accretive. The moves also led to growth in annual real estate income by around $155 million. Also, Penn National Gaming, Boyd Gaming and Eldorado Resorts are reputed and experienced operators in regional gaming, and will likely drive the company’s top-line growth.

The company has been displaying solid financial performance since its spin-off from PENN in 2013. It is able to generate consistent cash flow and margin profile, and enjoys high cash flow conversion with capital expenditures being covered by operators. These are expected to have buoyed the company’s fourth-quarter performance. Additionally, the state and local governments’ heavy dependency on gaming tax revenues to support their budgets, signals brighter days ahead for Gaming and Leisure Properties.

Gaming and Leisure Properties also has a staggered debt maturity profile, ample liquidity, strong governance and demonstrated access to capital markets, which are anticipated to have continued in the quarter under review.

Moreover, the company has guided for fourth-quarter revenues of $304.7 million, up 26.6% from the prior-year quarter and adjusted FFO per share of $181.4, indicating estimated rise of 9.7%. Furthermore, the company projects adjusted EBITDA of $256.4 million for the fourth quarter, indicating estimated growth of 16.5% year over year.

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $304.9 million — indicating a year-over-year increase of almost 26.7%. Also, the Zacks Consensus Estimate for FFO per share of 84 cents indicates 10.5% jump, year over year. However, the Zacks Consensus Estimate for fourth-quarter FFO per share remained unchanged over the last 60 days.

Here is what our quantitative model predicts:

Gaming and Leisure Properties does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Gaming and Leisure Properties is 0.00%.

Zacks Rank: Gaming and Leisure Properties has a Zacks Rank of 2 (Buy), which increases the predictive power of ESP. However, we also need a positive ESP to be confident of a positive surprise.

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:

Hersha Hospitality Trust HT, scheduled to release earnings on Feb 25, has an Earnings ESP of +3.81% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Sabra Health Care REIT, Inc. SBRA, slated to release fourth-quarter results on Feb 24, has an Earnings ESP of +5.49% and a Zacks Rank of 3.

Federal Realty Investment Trust FRT, set to report quarterly numbers on Feb 13, has an Earnings ESP of +1.53% and carries a Zacks Rank #3.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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