Two REITs That Simply Exceeded Earnings Estimates and Forecasts

Beginners often ask themselves, “What causes certain stocks to rise while others don’t appreciate at all?” Although there are multiple answers, one of the main reasons stocks rise is because they release good earnings reports.

Investors want to own stocks whose earnings have grown over the past year and exceeded analyst consensus estimates. Analysts’ opinions often influence stock movements. So when a company beats analyst estimates, it sends a message to investors that its stock is undervalued. As a result, the stock often rises significantly after a decline in profits.

Take a look at two real estate investment trusts (REITs) that narrowly beat first-quarter earnings, revenue, and guidance estimates.

Pebblebrook Hotel Trust (NYSE:PEB) is a Bethesda, Maryland-based hotel REIT that invests in upscale hotel and resort properties in or near 13 urban markets in major U.S. gateway cities. Most of his 46 properties are located in California and Florida.

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Pebblebrook Hotel has been on the rise since November, when it traded in the mid-$11s. The total return prior to the release of the first quarter earnings report was 31.77%. Much of this was driven by a strong fourth-quarter 2023 earnings report in February, which significantly beat Street estimates and its prior-year results for funds from operations (FFO) and revenue.

Unsurprisingly, the company repeated that performance on April 24 with its first-quarter operating results. Adjusted funds from operations (AFFO) of $0.21 per share beat the consensus estimate of $0.15 per share by 40% and exceeded FFO of $0.11 as of the first quarter of 2023. Revenue was with $314.069 million, above the consensus estimate of $303.776 million and also surpassing its Q1 2023 revenue of $305.719 million.

Additionally, Pebblebrook said it expects AFFO of $0.59 to $0.63 per share for the second quarter of 2024. Analysts had expected $0.56 per share.

Pebblebrook rose about 1% in early morning trading following the earnings release.

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Agree Realty Corp. (NYSE:ADC) is a Bloomfield Hills, Michigan-based triple-net lease REIT focused on retail real estate. Its portfolio includes 2,161 owned and operated properties totaling 45 million square feet in 49 states. 69 percent of tenants are investment grade tenants, including well-known names like Walmart Inc. (NYSE:WMT), Best Buy Co. Inc. (NYSE:BBY) Dollar General Corp. (NYSE:DG) and Kroger Co. (NYSE:KR).

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Despite an excellent long-term track record since its IPO in 1994, Agree Realty has underperformed in 2024. Ahead of the earnings release, the company posted a negative 8.2% year-to-date total return. Over the last 52 weeks, the total return was negative 9.27%.

But that hasn’t dampened management’s optimism and enthusiasm. Agree Realty has seen significant insider buying over the last 12 months as share prices fell. This chart shows the large number of shares bought by insiders compared to shares sold in the last three and twelve months:

Additionally, on April 8, Agree Realty announced an increase in its monthly common dividend from $0.247 to $0.25, an annual increase of 2.9%. The dividend will be paid on May 14 to shareholders of record as of the close of business on April 30, with the ex-dividend date being April 29. A dividend increase shortly before an earnings release is often a positive sign that upcoming earnings will arrive or exceed expectations.

So it’s perhaps not all that surprising that Agree Realty reported its first-quarter results on April 24, and the results were excellent. FFO of $1.03 per share beat analysts’ estimate of $1.01 per share. The FFO also exceeded Agree’s first quarter 2023 FFO of $0.98 per share. Revenue of $149.453 million beat the consensus estimate of $146.462 million and represented an 18.03% increase from first quarter 2023 revenue of $126.618 million.

For full-year 2024, Agree said AFFO would be $4.10 to $4.13 per share. The street estimate was $4.07. Investors were impressed and shares traded over 2% higher in early morning trading following the release of the report.

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This article, “Two REITs That Just Beat Earnings Estimates and Forecasts” originally appeared on Benzinga.com

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