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Key Factors to Impact Alexandria (ARE) This Earnings Season

Alexandria Real Estate Equities Inc. ARE is scheduled to report first-quarter 2021 results on Apr 26, after market close. The company’s results are anticipated to reflect year-over-year growth in funds from operations (FFO) per share.

In the last reported quarter, this Pasadena, CA-based urban office real estate investment trust (REIT), which primarily focuses on collaborative life-science and technology campuses, delivered an in-line performance in terms of FFO per share. The company witnessed continued healthy leasing activity and rental rate growth during the quarter.

Over the trailing four quarters, the company met the Zacks Consensus Estimate on each occasion. The graph below depicts this surprise history:

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

Factors at Play

During the quarter under review, Alexandria is expected to have witnessed healthy leasing activity, decent rental rate growth and occupancy. This is because, the company’s properties and its tenants have become indispensable, amid the heightening need for effective diagnostics, therapies and vaccines to fight the ongoing health crisis.

Alexandria’s lab-office assets are anticipated to have seen high demand during the first quarter, on higher investments in pharmaceutical research and development as well as critical monetary support from the government and hirings by its tenants.

The company has Class A properties in AAA locations. With high demand, its ownership of such premium properties in strategic cluster locations is likely to have driven occupancy levels and rent growth during the March-end quarter.

Apart from these, a substantial part of the company’s revenues come in from investment-grade or publicly-traded large-cap tenants. Also, with its campuses being essential and mission-critical for the tenants, rent collections during the to-be-reported quarter are likely to have been impressive.

These are likely to have aided revenue and net operating income growth for the company during the first quarter. Moreover, Alexandria enjoys adequate financial flexibility to cushion and enhance its market position and this trend is likely to have continued in the quarter under review.

Notably, the company had $4.1 billion of liquidity as of the end of fourth-quarter 2020. Net debt and preferred stock to adjusted EBITDA of 5.3x and fixed-charge coverage ratio of 4.6x mark the lowest and highest, respectively, in the past 10 years. Also, the company has no debt maturities prior to 2024 and its weighted-average remaining term of debt as of Dec 31, 2020 is 10.6 years. Given the company’s prudent financial management, such trends are likely to have continued in the quarter under consideration.

The Zacks Consensus Estimate for the first-quarter FFO per share is currently pinned at $1.85, calling for a 1.65% increase from the prior-year period.

However, there is a weakness in demand for spaces from tenants belonging to the technology industry. Nevertheless, the company has a comparatively smaller exposure to this industry.

Amid these, prior to the first-quarter earnings release, there is lack of any solid catalyst to be optimistic. Therefore, the Zacks Consensus Estimate for the quarterly FFO per share has remained unchanged over the past month.

Here is what our quantitative model predicts:

Alexandria does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of a FFO 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 Alexandria is 0.00%.

Zacks Rank: Alexandria currently carries a Zacks Rank of 3 (Hold).

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:

Crown Castle International Corporation CCI, slated to release first-quarter earnings on Apr 21, has an Earnings ESP of +0.73% and carries a Zacks Rank of 3, at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Digital Realty Trust, Inc. DLR, scheduled to report quarterly numbers on Apr 29, currently has an Earnings ESP of +1.06% and carries a Zacks Rank of 3 (Hold).

CubeSmart CUBE, slated to release quarterly numbers on Apr 29, currently has an Earnings ESP of +3.14% and carries a Zacks Rank of 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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Crown Castle International Corporation (CCI): Free Stock Analysis Report
 
Digital Realty Trust, Inc. (DLR): Free Stock Analysis Report
 
Alexandria Real Estate Equities, Inc. (ARE): Free Stock Analysis Report
 
CubeSmart (CUBE): Free Stock Analysis Report
 
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