3 REITs That Beat Analyst’s Estimates But Missed On Guidance - Essex Property Trust (NYSE:ESS), Highwoods Props (NYSE:HIW)

February 10, 2023

Over time, strong earnings will usually result in an increase in a company’s stock price. But stock prices can fluctuate greatly in the days following earnings reports and may even make large upside moves if the earnings are not only good but also top Wall Street’s estimates.

Companies that beat the estimates on earnings and/or revenue often continue to do well over the next quarter. But when forward guidance is below analysts’ estimates, it can considerably reduce the Street’s enthusiasm for the stock.

Take a look at three real estate investment trusts (REITs) that beat analysts’ fourth-quarter estimates. Forward guidance is another matter:

Healthpeak Properties Inc. PEAK is a Denver-based diversified healthcare REIT that owns and operates private-pay facilities such as life science centers, medical offices and senior housing. The company was added to the S&P 500 in 2008.

Healthpeak Properties owns 480 properties across the U.S. valued at more than $20 billion. Many of Healthpeak Properties’ life science tenants are large, well-known pharmaceuticals, such as Amgen Inc., Pfizer Inc. and Bristol Myers Squibb.

On Feb. 7, Healthpeak Properties reported its fourth-quarter and full-year 2022 operating results. Adjusted funds from operations (AFFO) of $0.44 were up 7.3% over FFO of $0.41 reported in the fourth quarter of 2021 and a penny above analysts’ estimates. Revenue of $524.47 million was about 1% above the Street’s estimates of $519.38 million and 8.5% above revenue of $483.2 million from the fourth quarter of 2021.

But Healthpeak’s $1.70 to $1.76 forward guidance of adjusted FFO for 2023 fell short of Wall Street’s consensus estimates of $1.77.

Highwoods Properties Inc. HIW is a Raleigh, North Carolina-based office REIT that purchases, leases and manages properties in eight strong but smaller markets throughout the Southeast. Its tenant base includes the federal government, Bank of America Corp. and MetLife Inc. Highwoods Properties is a member of the S&P Midcap 400 Index.

On Feb. 7, Highwoods Properties announced its fourth-quarter operating results. FFO of $0.96 was down from $1.06 in the fourth quarter of 2021 but in line with Wall Street’s estimates. However, revenue of $211.71 million was ahead of the estimates by $1.38 million and was 4.19% higher than the $203.21 million in the fourth quarter of 2021.

Highwoods Properties also said it expects FFO per share to fall in a range between $3.66 and $3.82 for 2023. However, Wall Street analysts are expecting $3.83.

Essex Property Trust Inc. ESS is a San Mateo, California-based residential REIT that owns and manages 62,000 apartment units in 253 communities, along with some retail space in nine West Coast markets. Essex Property Trust was founded in 1971 and launched its initial public offering (IPO) in 1994.

Essex Property Trust has a record of 28 consecutive years of dividend increases, making it an S&P 500 Dividend Aristocrat. According to its website, it was the only REIT to increase its dividend during the recession in 2010.

On Feb. 7, Essex Property Trust reported its fourth-quarter operating results. FFO of $3.77 was 4 cents above estimates and well ahead of the $3.25 FFO achieved in the fourth quarter of 2021. Revenue of $406.86 million was 12.82% better than the $352.88 million in the fourth quarter of 2021 and ahead of the Street’s estimates by $1.64 million.

Essex Property Trust also stated its 2023 core FFO guidance will be in a range from $14.53 to $14.97, with a midpoint of $14.75. However, Wall Street’s midpoint consensus was much higher at $15.20. Essex Property Trust now expects first-quarter 2023 core FFO to fall in a range of $3.51 to $3.63, with a midpoint of $3.57. That’s below Wall Street’s consensus of $3.71.

So the good news is that REITs seem to be improving FFO and revenue numbers from a year ago. But 2023 may be another matter, and Wall Street may need to adjust its loftier expectations for REITs going forward.

Weekly REIT Report: REITs are one of the most misunderstood investment options, making it difficult for investors to spot incredible opportunities until it’s too late. Benzinga’s in-house real estate research team has been working hard to identify the greatest opportunities in today’s market, which you can gain access to for free by signing up for Benzinga’s Weekly REIT Report.

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