The Zacks Analyst Blog Highlights: Tesla, CBRE Group, Spirit Realty Capital, DDR and Realty Income
CHICAGO, Feb. 6, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Tesla (Nasdaq:TSLA-Free Report), CBRE Group, Inc. (NYSE:CBG-Free Report), Spirit Realty Capital, Inc. (NYSE:SRC-Free Report), DDR Corp. (NYSE:DDR-Free Report) and Realty Income Corp. (NYSE:O-Free Report).
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Here are highlights from Wednesday's Analyst Blog:
Ladies and Gentlemen, Start Your... Batteries?
My first car was Ford Mustang GT. I didn't even know how to drive stick when I bought it. I instantly fell in love. Until I had to drive it everyday back and forth to work. Then I felt the pain at the pump. As a result, I started driving a Chevy Cavalier to keep the dollars in my wallet. 30mpg vs 17mpg.
Best of Both Worlds
I gave up looking cool and driving fast for eventually showing up and having good fuel economy. Well now there's a way to look cool, drive fast and have good fuel economy. AutomakerTesla (Nasdaq:TSLA-Free Report) put it all together by bringing a well-made electric luxury car with curb appeal to the market. CEO Elon Musk, the real-life Tony Stark, took on the risk that the "Big Three" Detroit automakers were afraid to. As a result TSLA has been a dream stock for shareholders while the rest of the sector has struggled.
My favorite part about stocks like TSLA is how they go up enough to make people shake their heads in disbelief. They scream about the valuations, wonder where the growth is going to come from, and worry about every sneeze that comes out of China. What matters to me is that right now TSLA is a Zacks #1 Rank stock and the chart looks bullish. Three analysts have revised their current year and next year's earnings estimates to the upside. When TSLA reports on February 19th it could mark the first quarter that TSLA is in the green. If TSLA stock has been going nuts without earnings, what will happen when they actually make money? I think the stock will run further.
REITs Poised for Q4 Earnings Beats
REIT stock prices have been on a roller coaster over the past one year due to concerns surrounding the interest rate environment with the Federal Reserve's movement related to the economic stimulus. Finally, convinced by the consistent pickup in economic activity and labor market improvement, the Federal Reserve started tapering its bond buying program. With gradual reduction in the Fed's support, interest rates are expected to increase, which may in turn hurt the rate-sensitive business of REITs in the long run.
The broader picture, however, does not take away opportunities from portfolio diversification that REITs offer owing to their distinct asset class status. Real estate comprises different types of assets that perform based on individual market dynamics. Investors too can gain maximum leverage from the changes seen time to time in performances by these assets.
ConsumerConfidence BuildingUp
A solid GDP report and encouraging U.S. retail data clearly indicate growing consumer confidence; and the Fed's new-found faith in the economy further reinforces that. Consequently, this is an opportune moment for companies providing real estate support to the retail sector.
Moreover, with the interest rate still remaining at a low level, REITs will continue to benefit in the short term. So you should consider adding some high potential REITs to your portfolio now.
Amid lower supply of new properties, steadily rising demand is shaping up as the sector's growth driver for years to come.
As per recent analysis by the commercial real estate services firm CBRE Group, Inc. (NYSE:CBG-Free Report), the retail availability rate fell 30 bps to 12.0% for the fourth quarter and moved 70 bps down for 2013, reflecting consistent improvement in net absorption. CBRE's outlook of a further drop in the availability rate for neighborhood and community shopping centers to 10.6% in 2014 is added good news for the sector.
How to Find a Top Pick
Picking the right stock from different sub sectors and stock diversity in the REIT sector could be a tall order. But an easy way to narrow down the list is to take a look at stocks with favorable Zacks Rank and positive Zacks Earnings ESP.
Earnings ESP is our proprietary methodology for determining stocks having the best chance to surprise with their next earnings announcement. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
The combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) – and a positive earnings ESP, is usually a solid indication of earnings beat. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
Here are 3 REIT stocks that have the right combination of elements to deliver an earnings beat in their upcoming announcements. Surely, an earnings beat would reinforce investors' confidence in these stocks and result in quick price appreciation. This, along with the solid dividend income that these REITs offer, guarantees encouraging returns.
Spirit Realty Capital, Inc. (NYSE:SRC-Free Report) has a Zacks Rank #3 and an earnings ESP of +5.26%. The Zacks Consensus Estimate for the fourth quarter is pegged at 19 cents per share. Moreover, the company has delivered an average positive earnings surprise of 20.0% over the trailing 4 quarters.
Scottsdale, Arizona-based Spirit Realty makes nation-wide investments in single tenant, operationally essential real estate where the tenants carry out retail, service or distribution activities. With consumer confidence building up and economic activity gaining momentum, we believe the demand for such properties would go up and in turn offer decent upside potential to the stock price.
- Spirit Realty is expected to announce its fourth-quarter results after market close on Feb 27.
- DDR Corp. (NYSE:DDR-Free Report) Zacks Consensus Estimate for the fourth quarter is 29 cents per share.
- Beachwood, Ohio-based DDR Corp. is a retail REITs which acquires, owns, develops, redevelops, leases and manages shopping centers, especially in high growth areas in the continental United States, Puerto Rico and Brazil.
- – DDR is scheduled to announce its fourth -quarter results after market close on Feb 12.
- Realty Income Corp. (NYSE:O-Free Report) carries a Zacks Rank #2 and has an earnings ESP of + 1.64%. The Zacks Consensus Estimate for the fourth quarter is 61 cents per share. The company has registered a positive earnings surprise in three out of last four quarters with an average beat of 1.36 %.
- Escondido, Calif.-based monthly dividend company owns more than 3,800 properties under long-term lease deals with regional and national retail chains as well as other commercial enterprises.
- - Realty Income is scheduled to announce its fourth-quarter results on Feb 13.
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