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Alexandria (ARE) to Post Q4 Earnings: What's in the Cards?

Alexandria Real Estate Equities Inc. ARE is scheduled to release fourth-quarter and full-year 2022 results on Jan 30 after the closing bell. Its quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Pasadena, CA-based life science real estate investment trust (REIT), focusing on collaborative life science, agtech and technology campuses in AAA innovation cluster locations, delivered a surprise of 0.47% in terms of adjusted FFO per share. ARE’s performance in the quarter was mainly driven by healthy leasing activity and rental rate growth.

Alexandria has a decent surprise history. Over the preceding four quarters, ARE’s adjusted FFO per share surpassed the Zacks Consensus Estimate on each occasion, the average beat being 1.36%. This is depicted in the graph below:

Alexandria Real Estate Equities, Inc. Price and EPS Surprise

Alexandria Real Estate Equities, Inc. Price and EPS Surprise
Alexandria Real Estate Equities, Inc. Price and EPS Surprise

Alexandria Real Estate Equities, Inc. price-eps-surprise | Alexandria Real Estate Equities, Inc. Quote

Factors at Play

Alexandria has Class A properties in AAA locations. The high demand for Alexandria’s highly differentiated facilities, especially the key life science segment, is anticipated to have driven decent leasing and re-leasing activity and aided occupancy levels in the fourth quarter.

The life science segment usually experiences resilience, even during economic downturns. The need for more effective and cost-efficient therapies and high demand from an aging population drive demand in this segment. As such, favorable demand-supply dynamics and ARE’s strong pricing power in its core markets are likely to have played a key role in its rental rate growth this quarter.

Alexandria is also focused on maintaining its tenant quality. The majority of its rental revenues come from investment-grade or publicly-traded large-cap tenants. As a result, its long-term lease agreements with these tenants are expected to have generated impressive rent collections in the to-be-reported quarter. Backed by the healthy demand for its properties, ARE is expected to have continued with its development and redevelopment activities in the fourth quarter.

Alexandria is expected to have maintained adequate financial flexibility to enhance its market position in the quarter. This is expected to have supported its development pipeline as well. These factors are anticipated to have aided revenues and the net operating income growth of ARE in the fourth quarter.

The Zacks Consensus Estimate for quarterly revenues currently stands at $654.75 million, suggesting a 13.5% increase from the prior-year period’s reported figure.

The Zacks Consensus Estimate for the quarterly adjusted FFO per share currently stands at $2.13, suggesting an 8.12% increase from the prior-year period’s reported figure.

However, ahead of the fourth-quarter earnings release, there is a lack of any solid catalyst to make investors bullish on the stock. Hence, the Zacks Consensus Estimate for the quarterly FFO per share has been unchanged over the past month.

For the full-year 2022, Alexandria projected adjusted FFO per share in the range of $8.40-$8.42. This is backed by same-property NOI growth at 6-8%, rental rate increases for lease renewals and re-leasing of space at 30-35% and occupancy in North America (as of Dec 31, 2022) in the band of 95.0-95.6%. Our projection for year-end occupancy is 95.6%.

For the full year, the Zacks Consensus Estimate for adjusted FFO per share is pegged at $8.41. The figure indicates an 8.38% increase year over year on 21.7% year-over-year growth in revenues to $2.57 billion.

What Our Quantitative Model Predicts

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

Earnings ESP: Alexandria has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: ARE currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks That Warrant a Look

Here are three stocks from the REIT sector — First Industrial Realty Trust, Inc. FR, STAG Industrial, Inc. STAG and Gladstone Commercial Corporation GOOD — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.

First Industrial Realty Trust is slated to report quarterly numbers on Feb 8. FR has an Earnings ESP of +7.65% and carries a Zacks Rank of 3 presently.

STAG Industrial, scheduled to report quarterly numbers on Feb 15, has an Earnings ESP of +2.89% and carries a Zacks Rank of 2.

Gladstone Commercial Corporation is slated to report quarterly numbers on Feb 22. GOOD has an Earnings ESP of +5.13% and sports a Zacks Rank of 1 presently.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

First Industrial Realty Trust, Inc. (FR) : Free Stock Analysis Report

Alexandria Real Estate Equities, Inc. (ARE) : Free Stock Analysis Report

Stag Industrial, Inc. (STAG) : Free Stock Analysis Report

Gladstone Commercial Corporation (GOOD) : Free Stock Analysis Report

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