Simon Property Group’s (SPG – Free Report) fourth-quarter and full-year 2022 results are scheduled to be released on Feb 6 after the closing bell. The company’s quarterly results are likely to exhibit year-over-year growth in revenues and funds from operations (FFO) per share.
In the last reported quarter, this Indianapolis, IN-based retail real estate investment trust (REIT) delivered a surprise of 1.37% in terms of FFO per share. The quarterly results reflected healthy operating performance and growth in occupancy levels. The retail REIT behemoth also raised the 2022 FFO per share outlook based on the quarterly results.
In the last four quarters, the company beat the Zacks Consensus Estimate on each occasion, the average surprise being 3.05%. This is depicted in the graph below:
Factors at Play
Per a report from CBRE Group (CBRE – Free Report) , retail real estate markets remained robust in the fourth quarter, with resilient demand driving the retail availability rate to 4.9% after hitting a high of 6.6% in fourth-quarter 2020.
The core retail sales, excluding motor vehicles, gasoline and auto parts, climbed 7.1% from the prior-year period. The non-store retail sales, which include e-commerce, grew 11.3% year over year.
The retail asking rent improved 2.5% year over year for the second consecutive quarter to $22.78 per square foot in the fourth quarter. This was primarily driven by strong demand and limited new supply.
Retail space absorption came in at 12.7 million square feet for fourth-quarter 2022, marking the ninth consecutive quarter of positive retail absorption per the CBRE Group report.
Simon Property, too, is anticipated to have benefited from the above-mentioned factors.
The increase in consumers’ preference for in-person shopping experiences following the pandemic downtime has been benefiting retail REITs as retailers continue to rent out more physical store spaces to meet this growing demand. This is likely to have driven demand for SPG’s properties, aiding its fourth-quarter cashflows.
Simon Property’s adoption of an omni-channel strategy and successful tie-ups with premium retailers are likely to have paid off well. In November, SPG announced that Leap, the retail platform for modern brands, would open numerous stores at its properties. The move is expected to help many digitally native brands to strategically expand as omnichannel retailers.
Further, its efforts to explore the mixed-use development option, which has gained immense popularity in recent years, is anticipated to have enabled it to tap the growth opportunities in areas where people prefer to live, work and play. In November, Nobu Hospitality and Simon Property celebrated the opening of Nobu Hotel & Restaurant Atlanta at the mixed-use development — Phipps Plaza — in Buckhead.
The Zacks Consensus Estimate for fourth-quarter lease income is pegged at $1.26 billion, up from $1.23 billion reported in the year-ago quarter. The consensus mark for management fees and other revenues is $28.79 million, up 2.5% from the prior-year quarter’s reported figure. In addition, the consensus estimate for quarterly revenues is presently pegged at $1.37 billion, indicating an increase of 3.1% year over year.
On the acquisition front, in December 2022, Simon Property closed its earlier announced strategic partnership with Jamestown, wherein the former acquired a 50% interest in the latter from its founding partners. Through the partnership, SPG will be able to drive its future densification projects with the help of Jamestown’s platform, making the buyout a strategic fit.
However, increasing interest expenses might have been a deterrent for Simon Property during the quarter.
The Zacks Consensus Estimate for FFO per share has been unchanged over the past month at $3.14. Nonetheless, the figure indicates a rise of 1.6% year over year.
For 2022, Simon Property projected FFO per share in the range of $11.83-$11.88.
For the full year, the Zacks Consensus Estimate for FFO per share has been unchanged at $11.68 over the past month. The figure indicates a fall of 2.2% year over year on revenues of $5.24 billion.
Earning Whispers
Our proven model does not conclusively predict a surprise in terms of FFO per share for SPG this season. The combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that’s not the case here.
Earnings ESP: Simon Property 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: SPG currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.
Stocks That Warrant a Look
Here are some other stocks that are worth considering from the retail REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:
Federal Realty Investment Trust (FRT – Free Report) is scheduled to report quarterly figures on Feb 8. FRT has an Earnings ESP of +0.32% and a Zacks Rank of 3 currently.
Regency Centers (REG – Free Report) is slated to report quarterly numbers on Feb 9. REG has an Earnings ESP of +0.47% and carries a Zacks Rank of 3.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Note: Anything related to earnings presented in this write-up represent FFO — a widely used metric to gauge the performance of REITs.
ACRES Commercial (ACR – Free Report) has recently been on Zacks.com’s list of the most searched stocks. Therefore, you might want to consider some of the key factors that could influence the stock’s performance in the near future.
Shares of this commercial real estate investment trust have returned +12.4% over the past month versus the Zacks S&P 500 composite’s +4.8% change. The Zacks REIT and Equity Trust industry, to which ACRES Commercial belongs, has gained 14.2% over this period. Now the key question is: Where could the stock be headed in the near term?
Although media reports or rumors about a significant change in a company’s business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.
Revisions to Earnings Estimates
Here at Zacks, we prioritize appraising the change in the projection of a company’s future earnings over anything else. That’s because we believe the present value of its future stream of earnings is what determines the fair value for its stock.
Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock’s fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
For the current quarter, ACRES Commercial is expected to post earnings of $0.45 per share, indicating a change of +104.6% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
For the current fiscal year, the consensus earnings estimate of $1.03 points to a change of +2,160% from the prior year. Over the last 30 days, this estimate has remained unchanged.
For the next fiscal year, the consensus earnings estimate of $1.86 indicates a change of +80.6% from what ACRES Commercial is expected to report a year ago. Over the past month, the estimate has remained unchanged.
Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock’s price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, ACRES Commercial is rated Zacks Rank #3 (Hold).
The chart below shows the evolution of the company’s forward 12-month consensus EPS estimate:
12 Month EPS
Projected Revenue Growth
While earnings growth is arguably the most superior indicator of a company’s financial health, nothing happens as such if a business isn’t able to grow its revenues. After all, it’s nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it’s important to know a company’s potential revenue growth.
For ACRES Commercial, the consensus sales estimate for the current quarter of $12.2 million indicates a year-over-year change of +2.6%. For the current and next fiscal years, $42.3 million and $50.5 million estimates indicate +7.2% and +19.4% changes, respectively.
Last Reported Results and Surprise History
ACRES Commercial reported revenues of $11.13 million in the last reported quarter, representing a year-over-year change of +17.8%. EPS of $0.40 for the same period compares with -$0.36 a year ago.
Compared to the Zacks Consensus Estimate of $10.6 million, the reported revenues represent a surprise of +4.96%. The EPS surprise was +29.03%.
Over the last four quarters, ACRES Commercial surpassed consensus EPS estimates three times. The company topped consensus revenue estimates three times over this period.
Valuation
Without considering a stock’s valuation, no investment decision can be efficient. In predicting a stock’s future price performance, it’s crucial to determine whether its current price correctly reflects the intrinsic value of the underlying business and the company’s growth prospects.
Comparing the current value of a company’s valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.
The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.
ACRES Commercial is graded B on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.
Conclusion
The facts discussed here and much other information on Zacks.com might help determine whether or not it’s worthwhile paying attention to the market buzz about ACRES Commercial. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.
Mid-America Apartment Communities, Inc. (MAA – Free Report) — commonly known as MAA — is slated to report fourth-quarter and full-year 2022 results on Feb 1 after market close. MAA’s quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.
The Germantown, TN-based residential real estate investment trust (REIT) delivered a surprise of 4.78% in terms of FFO per share in the last reported quarter. This residential REIT’s quarterly results were driven by an increase in the average effective rent per unit for the same-store portfolio.
MAA has a decent surprise history. Over the trailing four quarters, MAA surpassed the Zacks Consensus Estimate on all occasions, the average being 2.50%. This is depicted in the chart below:
Let’s see how things have shaped up for the announcement.
Factors to Consider
For the U.S. apartment market, low consumer confidence and high inflation have taken a toll, with net demand for apartments ending in negative territory for calendar 2022, per a report from the real estate technology and analytics firm RealPage. Despite solid job growth and wage gains, there was weak demand for all types of housing.
Amid this soft demand, new-lease apartment rents fell in December for the fourth consecutive month, declining another 0.4%. The cumulative rent drop was around 1.6% since September. Also, the national apartment vacancy surged from a record seasonal low of 2.5% one year ago to 5.0% in December 2022.
However, MAA’s diversified Sunbelt portfolio is well-poised to benefit from the favorable fundamentals of this market. The pandemic accelerated employment shifts and a population inflow into the company’s markets as renters seek more business-friendly, lower-taxed and low-density cities. These favorable longer-term secular dynamic trends are increasing the desirability of its markets.
The high pricing of single-family ownership units continues to drive the demand for rental apartments. Amid this, MAA is well-poised to capture recovery in demand and leasing compared to expensive coastal markets. In the fourth quarter, MAA is expected to have experienced strong rent growth and stable occupancy, thereby driving revenue growth.
MAA also continues to implement its three internal investment programs — interior redevelopment, property repositioning projects and Smart Home installations. The programs are expected to have helped the company capture the upside potential in rent growth, generate accretive returns and boost earnings from its existing asset base.
The Zacks Consensus Estimate for quarterly revenues is pegged at $525.5 million, suggesting a 13.36% rise from the year-ago quarter’s reported figure. Same-store revenues are projected at $517.65 million, indicating an increase from the $495.38 million reported in the prior quarter and $444.39 million in the year-ago period.
The consensus estimate for physical occupancy is presently pegged at 95.7% for the fourth quarter, slightly lower than 95.8% in the prior quarter.
MAA projects the fourth-quarter 2022 core FFO per share in the band of $2.19-$2.35, with $2.27 at the midpoint.
Before the fourth-quarter earnings release, the company’s activities were adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been revised a cent upward to $2.28 in the past month. This suggests year-over-year growth of 20%.
This residential REIT estimates 2022 core FFO per share in the range of $8.37-$8.53, with a midpoint of $8.45. This is backed by a projection for same-store property revenue growth of 13.0-14.0%, same-store property operating expense growth between 7.0% and 7.5% and same-store NOI growth anticipated between 16.0% and 18.0%.
For the full year, the Zacks Consensus Estimate for core FFO per share is pegged at $8.46. The figure indicates a 20.7% increase year over year on 13.5% year-over-year growth in revenues to $2.02 billion.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for MAA this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
MAA currently carries a Zacks Rank of 3 and has an Earnings ESP of -0.06%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are three stocks from the broader REIT sector — First Industrial Realty Trust, Inc. (FR – Free Report) , STAG Industrial, Inc. (STAG – Free Report) and Gladstone Commercial Corporation (GOOD – Free Report) — 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. You can see the complete list of today’s Zacks #1 Rank stocks here.
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.
Omega Healthcare Investors, Inc. (OHI – Free Report) is slated to report fourth-quarter and full-year 2022 results on Feb 2 after the closing bell. The company’s quarterly results are likely to display a year-over-year fall in revenues and funds from operations (FFO) per share.
In the last reported quarter, this healthcare real estate investment trust reported adjusted FFO per share of 76 cents, in line with the Zacks Consensus Estimate. OHI’s top line declined 14.9% year over year on asset sales and operator restructurings. However, lower expenses in the quarter were a tailwind.
The company’s FFO per share surpassed the consensus mark in one of the trailing four quarters, met the same in one and missed it in the other two, with the average beat being 0.36%. This is depicted in the graph below.
Factors at Play
Omega Healthcare invests in the long-term healthcare industry with a particular focus on skilled nursing facilities (SNFs) and assisted living facilities (ALFs). Its properties are located in the United States and the United Kingdom and are operated by a diverse group of healthcare companies, primarily in a triple-net lease structure.
In recent quarters, the aftermath of COVID-19 has been adversely impacting both occupancy and staffing for several of the company’s operators. Per the November Investor Presentation, the company noted that expenses per patient day, although having eased out, remain elevated compared with January 2020, mainly due to higher staffing-related costs. This has led some operators to default on rent payments, and OHI’s exposure to troubled operators turned out to be a pressing concern.
In October 2022, Omega collected rent from operators representing around 91% of its third-quarter 2022 annualized contractual rent and mortgage obligations. Hence, the nonpayment of the rent by some operators is likely to have affected the company’s performance in the fourth quarter.
Moreover, with regards to the ongoing restructurings concerning Maplewood and LaVie, they were placed on a cash basis for revenue recognition during the quarter under preview. Consequently, OHI anticipates incurring a non-cash write-off of straight-line accounts receivable and lease inducements totaling $29.3 million and $58 million, respectively, which is likely to have resulted in lower rental income in fourth-quarter 2022.
The Zacks Consensus Estimate for fourth-quarter rental income is pegged at $166.6 million, down from $203.2 million in the prior quarter and $214.3 million in the year-ago period. The consensus mark for fourth-quarter revenues of $146.1 million indicates a 41.6% decline year over year.
Also, the company’s restructurings are expected to have led to a fall in EBITDA and funds available for distribution during the quarter. The near-term leverage, too, is likely to have been higher than the historical range.
Omega Healthcare’s activities during the December-quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been revised 1.4% downward to 73 cents over the past month. The figure also implies a fall of 5.2% year over year.
For the full year, the Zacks Consensus Estimate for FFO per share has been revised marginally downward to $3.00 over the past month. Moreover, the figure indicates a 9.4% decrease year over year on revenues of $850.8 million.
Earnings Whispers
Our proven model does not conclusively predict an FFO beat for Omega Healthcare this time. The right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that is not the case here.
Earnings ESP: OHI has an Earnings ESP of -0.46%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: OHI currently carries a Zacks Rank of 5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks That Warrant a Look
Here are some stocks that are worth considering from the REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:
Highwoods Properties (HIW – Free Report) is slated to release fourth-quarter earnings on Feb 7. HIW has an Earnings ESP of +0.10% and a Zacks Rank #3 (Hold) at present.
Ventas (VTR – Free Report) is scheduled to report quarterly figures on Feb 9. VTR has an Earnings ESP of +0.15% and a Zacks Rank #3 currently.
Stag Industrial (STAG – Free Report) is slated to report quarterly numbers on Feb 15. STAG has an Earnings ESP of +2.89% and carries a Zacks Rank #2 (Buy) presently.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Note: Anything related to earnings presented in this write-up represent FFO — a widely used metric to gauge the performance of REITs.
Increased 737 and 787 delivery figures are expected to have boosted The Boeing Company’s (BA – Free Report) commercial airplanes business in the fourth quarter. However, its fourth-quarter 2022 earnings, scheduled for release on Jan 25, are projected to reflect some impacts of abnormal costs related to the 777-9 program.
Click here to know how the company’s overall Q4 performance is likely to have been.
Solid 737 & 787 Jet Deliveries to Boost Growth
Thanks to steadily recovering air traffic (both domestic and international), improved delivery figures for Boeing’s 737 and 787 jets were observed in the fourth quarter of 2022. Notably, the aerospace giant delivered 110 737 jets in the soon-to-be-reported quarter, reflecting quite a solid improvement of 31% from 84 units delivered in the year-ago quarter.
Moreover, Boeing delivered 22 787 Dreamliner jets in the fourth quarter of 2022, compared to none in the year-ago period, following this product line’s delivery resumption in the third quarter of 2022. This must have also boosted the Boeing Commercial Airplane (BCA) segment’s top-line performance.
In fact, such significant delivery figures of 737 and 787 primarily drove a surge of 53.5% in the company’s overall commercial deliveries. This, in turn, must have contributed to BCA segment’s revenues in the soon-to-be-reported quarter.
Currently, the Zacks Consensus Estimate for Boeing’s commercial business segment’s revenues, pegged at $8,145 million, indicates a solid 71.5% improvement from the year-ago quarter’s reported figure.
Earnings Expectation
On the cost front, the delivery resumption of the 787 product line is likely to have boosted BCA’s operating profit, thereby adding impetus to its quarterly earnings.
Moreover, improvements in the BCA segment’s financial performance due to increasing 737 MAX and 787 deliveries and consistent efforts by the BCA team to manage costs through business transformation activities must have contributed to this unit’s bottom-line growth in the fourth quarter.
Further, a steady improvement in the company’s expenses is likely to have taken place in relation to the storage of the 737 aircraft as jets that were in the inventory are gradually getting delivered.
However, the production pause for the 777-9 program must have resulted in some abnormal costs for this segment, which in turn might have weighed on this unit’s Q4 bottom line.
So, the overall effect of the aforementioned factors on the BCA segment’s fourth-quarter earnings performance seems to have been favorable. Currently, the Zacks Consensus Estimate for Boeing’s commercial business segment is pegged at a loss of $291 million, indicating a solid improvement from the year-ago quarter’s reported loss of $4,454 million.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Boeing this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.
Boeing has an Earnings ESP of -119.45% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Below are three defense stocks that have the right combination for an earnings beat:
Spirit AeroSystems (SPR – Free Report) : It is scheduled to release its fourth-quarter results soon. SPR has an Earnings ESP of +93.75% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
SPR delivered a four-quarter average negative earnings surprise of 73.24%. The Zacks Consensus Estimate for Spirit AeroSystem’s fourth-quarter bottom line is pegged at a loss of 48 cents per share, which implies a solid improvement from a loss of 84 cents per share incurred in the fourth quarter of 2021.
Leidos Holdings (LDOS – Free Report) : It is scheduled to release its fourth-quarter results on Feb 14. LDOS has an Earnings ESP of +1.19% and a Zacks Rank #3.
LDOS delivered a four-quarter average earnings surprise of 2.01%. The Zacks Consensus Estimate for Leidos’ fourth-quarter earnings, pegged at $1.61 per share, suggests an improvement of 3.2% from the fourth quarter of 2021.
Airbus Group (EADSY – Free Report) is slated to report its fourth-quarter results soon. EADSY has an Earnings ESP of +6.25% and a Zacks Rank #2.
EADSY delivered a four-quarter average earnings surprise of 59.88%. The Zacks Consensus Estimate for EADSY’s fourth-quarter earnings, pegged at 48 cents per share, suggests a decline of 15.8% from the fourth quarter of 2021.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Vornado Realty Trust (VNO – Free Report) declared a 29.2% cut in its quarterly dividend. The company will now pay 37.5 cents per share in dividends from 53 cents paid out earlier. The reduced dividend will be paid out on Feb 10 to common shareholders of record as of Jan 30, 2023.
VNO noted that the dividend cut is “in recognition of the current state of the economy and capital markets.” The company’s reduced projection for 2023 taxable income mainly due to higher interest expenses resulted in the dividend cut.
Although Vornado has a portfolio of top-quality office spaces located in a few select, high-rent, high-barrier-to-entry markets of New York, Chicago and San Francisco, a choppy office market environment is likely to affect its leasing volume in the near term.
Intense competition from developers, owners and operators of office properties and other commercial real estates, including sublease space available from its tenants, is likely to curb Vornado’s ability to attract and retain tenants at relatively higher rents. Rising interest rates amid an inflationary environment are expected to add to the company’s woes.
Earlier, the pandemic-led business disruptions had resulted in lower rental income and occupancy erosion at its properties, leading to lower cash flow available for distribution.
In July 2020, the company made a 19.7% sequential reduction in its quarterly dividend to 53 cents per share amid uncertainties caused by the pandemic and continued this payout. The company paid out a quarterly cash dividend of 66 cents per share prior to that dividend cut.
Shares of this Zacks Rank #4 (Sell) company have gained 5.6% in the past three months, underperforming the industry’s rally of 14%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties Inc. (VICI – Free Report) and STAG Industrial, Inc. (STAG – Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
The Zacks Consensus Estimate for VICI Properties’ 2022 funds from operations (FFO) per share has moved 3.2% north to $1.92 over the past two months.
The Zacks Consensus Estimate for STAG Industrial’s 2022 FFO per share has been raised marginally over the past month to $2.21.
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.
Investors in Commercial Vehicle Group, Inc. (CVGI – Free Report) need to pay close attention to the stock based on moves in the options market lately. That is because the Mar 17, 2023 $5.00 Put had some of the highest implied volatility of all equity options today.
What is Implied Volatility?
Implied volatility shows how much movement the market is expecting in the future. Options with high levels of implied volatility suggest that investors in the underlying stocks are expecting a big move in one direction or the other. It could also mean there is an event coming up soon that may cause a big rally or a huge sell-off. However, implied volatility is only one piece of the puzzle when putting together an options trading strategy.
What do the Analysts Think?
Clearly, options traders are pricing in a big move for Commercial Vehicle Group shares, but what is the fundamental picture for the company? Currently, Commercial Vehicle Group is a Zacks Rank #4 (Sell) in the Automotive – Original Equipment industry that ranks in the Top 36% of our Zacks Industry Rank. Over the last 60 days, no analysts have increased their earnings estimates for the current quarter, while one analyst has revised the estimate downward. The net effect has taken our Zacks Consensus Estimate for the current quarter from 20 cents per share to 16 cents in that period.
Given the way analysts feel about Commercial Vehicle Group right now, this huge implied volatility could mean there’s a trade developing. Oftentimes, options traders look for options with high levels of implied volatility to sell premium. This is a strategy many seasoned traders use because it captures decay. At expiration, the hope for these traders is that the underlying stock does not move as much as originally expected.
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ACRES Commercial (ACR – Free Report) has been one of the most searched-for stocks on Zacks.com lately. So, you might want to look at some of the facts that could shape the stock’s performance in the near term.
Shares of this commercial real estate investment trust have returned +6.6% over the past month versus the Zacks S&P 500 composite’s +4% change. The Zacks REIT and Equity Trust industry, to which ACRES Commercial belongs, has gained 10% over this period. Now the key question is: Where could the stock be headed in the near term?
While media releases or rumors about a substantial change in a company’s business prospects usually make its stock ‘trending’ and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.
Revisions to Earnings Estimates
Rather than focusing on anything else, we at Zacks prioritize evaluating the change in a company’s earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.
Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock’s fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
ACRES Commercial is expected to post earnings of $0.45 per share for the current quarter, representing a year-over-year change of +104.6%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The consensus earnings estimate of $1.03 for the current fiscal year indicates a year-over-year change of +2,160%. This estimate has remained unchanged over the last 30 days.
For the next fiscal year, the consensus earnings estimate of $1.86 indicates a change of +80.6% from what ACRES Commercial is expected to report a year ago. Over the past month, the estimate has remained unchanged.
With an impressive externally audited track record, our proprietary stock rating tool — the Zacks Rank — is a more conclusive indicator of a stock’s near-term price performance, as it effectively harnesses the power of earnings estimate revisions. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #2 (Buy) for ACRES Commercial.
The chart below shows the evolution of the company’s forward 12-month consensus EPS estimate:
12 Month EPS
Projected Revenue Growth
Even though a company’s earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It’s almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company’s potential revenue growth is crucial.
For ACRES Commercial, the consensus sales estimate for the current quarter of $12.2 million indicates a year-over-year change of +2.6%. For the current and next fiscal years, $42.3 million and $50.5 million estimates indicate +7.2% and +19.4% changes, respectively.
Last Reported Results and Surprise History
ACRES Commercial reported revenues of $11.13 million in the last reported quarter, representing a year-over-year change of +17.8%. EPS of $0.40 for the same period compares with -$0.36 a year ago.
Compared to the Zacks Consensus Estimate of $10.6 million, the reported revenues represent a surprise of +4.96%. The EPS surprise was +29.03%.
Over the last four quarters, ACRES Commercial surpassed consensus EPS estimates three times. The company topped consensus revenue estimates three times over this period.
Valuation
No investment decision can be efficient without considering a stock’s valuation. Whether a stock’s current price rightly reflects the intrinsic value of the underlying business and the company’s growth prospects is an essential determinant of its future price performance.
Comparing the current value of a company’s valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.
As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.
ACRES Commercial is graded A on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.
Conclusion
The facts discussed here and much other information on Zacks.com might help determine whether or not it’s worthwhile paying attention to the market buzz about ACRES Commercial. However, its Zacks Rank #2 does suggest that it may outperform the broader market in the near term.
The Boeing Company’s (BA – Free Report) shares gained a solid 3.6% to reach $214.13 on Jan 13th, driven by its recently revealed impressive fourth-quarter 2022 delivery figures.
Notably, the company’s fourth-quarter 2022 delivery numbers reflect a solid improvement of 53.5% in commercial shipments from the previous year’s tally. Also, defense shipments rose 2.1% year over year.
Combining both the segments, Boeing’s total deliveries in the fourth quarter were 200 units compared with the 146 units delivered in the year-ago period. Such strong delivery numbers are likely to bolster BA’s top line in the fourth quarter.
Commercial Deliveries Remain a Key Contributor
Boeing reported commercial deliveries of 152 airplanes in the fourth quarter of 2022, an increase from the prior-year tally of 99. This was primarily driven by Boeing 737 and 787 airplane deliveries.
The shipments of Boeing 737 totaled 110 compared with 84 in the year-ago period, registering growth of 31% year over year. Boeing delivered 22 787 jets in the fourth quarter, while that in the year-ago quarter was nil.
The company also shipped 12 767 jets in the quarter, four more than the year-ago quarter’s tally.
The shipments of the 777 model totaled six, compared with four in the previous year’s third-quarter tally. The delivery figure of Boeing 747 was two in the quarter, compared with three in the last year’s figures.
Boeing vs. Airbus
A comparative analysis of Boeing’s archrival Airbus SE’s (EADSY – Free Report) commercial shipment indicates that the latter came ahead of Boeing in terms of delivery numbers. Airbus delivered 226 commercial aircraft in the fourth quarter, compared with Boeing’s 152 in the same period.
However, the year-over-year growth rate of both the companies has a different story, with Boeing’s deliveries indicating an improvement of an impressive 31%. Meanwhile, EADSY registered growth of 20.9%, indicating that BA is on a better growth trajectory.
Defense Deliveries Up
Boeing reported defense deliveries of 48 airplanes in the fourth quarter of 2022, an increase from the prior-year tally of 47.
The shipments of AH-64 Apache (remanufactured) deliveries remained steady at 14 compared with the year-ago period’s tally, while the delivery of AH-64 Apache (new) decreased to five compared with eight in the year-ago period. The company delivered nine CH-47 Chinook (new) jets in the fourth quarter compared with three in the year-ago quarter, while three CH-47 Chinook (renewed) were delivered in the reported quarter compared to none in 2021’s fourth-quarter.
The shipments of F-15 Models included three jets compared with five in the prior-year quarter. Meanwhile, the delivery of the KC-46 Tanker remained unchanged year over year at six, while three F/A-18 jets were delivered compared with six in the fourth quarter of 2022.
The delivery of P-8 models decreased to two from five in the fourth-quarter of 2021; two commercial and civil satellites were delivered compared to none in the year-ago quarter. One material satellite was delivered in the fourth quarter of 2022 compared to none in the same quarter of 2021.
Peer Prospects
Jet makers who are yet to report their delivery numbers are Textron (TXT – Free Report) and Embraer S.A. (ERJ – Free Report) .
In the last reported quarter, Embraer delivered 10 commercial and 23 executive (15 light and eight mid/super-midsize) jets compared with 11 commercial and 21 executive (12 light and nine large) jets in the prior quarter.
The long-term earnings growth rate for Embraer is pegged at 17%. The Zacks Consensus Estimate for ERJ’s 2022 earnings indicates an improvement of 300% from the prior-year reported figure.
Textron delivered 39 jets in the third quarter of 2022, down from 49 in the year-ago quarter. It also delivered 33 commercial turboprops, down from 35 in the third quarter of 2021.
The long-term earnings growth rate for Textron stands at 15.2%. The Zacks Consensus Estimate for TXT’s 2022 earnings indicates growth of 19.7% from the prior-year reported figure.
Price Performance
Shares of Boeing have surged 45% in the past six months compared with the industry’s growth of 9.2%.
Image Source: Zacks Investment Research
Zacks Rank
Boeing carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
W. P. Carey Inc.’s (WPC – Free Report) investment volume for 2022 reached $1.42 billion. This came amid a challenging market backdrop, and roughly two-thirds of its 2022 investment volume was in high-quality, single-tenant warehouse and industrial properties.
The investments are in line with the company’s externally-driven growth strategy, which is focused on high-quality industrial and warehouse assets. Also, geographically, around two-thirds of its 2022 investment volume was located in North America and one-third in Europe.
WPC, which specializes in corporate sale-leasebacks, build-to-suits and the acquisition of single-tenant net lease properties, remains well-poised to execute on a significant near-term pipeline. Its strong near-term pipeline includes more than $500 million of opportunities at advanced stages or under letters of intent.
Per Jason Fox, the CEO of W. P. Carey, in 2022, capitalization rates were “slow to adjust to higher interest rates.” This resulted in increasing uncertainty over the timing of investments. He noted that cap rates moved higher in the fourth quarter. The majority of the $160 million of investments completed during this period were “industrial and warehouse properties with cap rates in the high sixes and into the sevens.”
Fox also believes that “this sets up an environment in 2023 conducive to higher investment activity at wider spreads.” With substantial “dry powder”, the company remains well-poised to execute accretive investments. Moreover, with more than half of its portfolio having rent escalations tied to CPI, WPC is well-placed for internal growth within the net lease sector.
Amid an e-commerce boom, growth in industries and companies making efforts to improve supply-chain efficiencies, the demand for industrial real estate space and efficient distribution networks has been shooting up. Apart from the fast adoption of e-commerce, the industrial real estate space is poised to gain traction over the long run from a likely rise in the inventory levels of companies as a precaution for any supply-chain disruption.
Hence, W. P. Carey is well-poised to benefit from investments in the industrial distribution warehouse space in some of the busiest distribution markets worldwide.
However, rate hikes, inflation and macroeconomic uncertainty are raising concerns. Shares of this Zacks Rank #4 (Sell) company have rallied 14.7% in the past three months, outperforming the industry’s increase of 10.1%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties Inc. (VICI – Free Report) and STAG Industrial, Inc. (STAG – Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
The Zacks Consensus Estimate for VICI Properties’ 2022 funds from operations (FFO) per share has moved 3.2% north to $1.92 over the past two months.
The Zacks Consensus Estimate for STAG Industrial’s 2022 FFO per share has been raised marginally over the past week to $2.21.
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.