Real estate investment trusts (REITs) have generally performed well in their latest fourth-quarter earnings reports, often matching or beating analysts’ estimates in terms of funds from operations (FFO) and revenue.
But some REITs have underperformed expectations, whether in fourth-quarter metrics and/or full-year 2024 forward guidance. When this happens, stock prices typically fall, and analysts often downgrade stocks as well, further depressing prices .
Take a look at four REITs that disappointed Wall Street recently with fourth-quarter operating results that fell short of expectations and received downgrades from analysts. As a result, all four suffered losses in stock value.
Hudson Pacific Properties Inc. HPP is a Los Angeles-based REIT with 48 offices and six film studios with an emphasis on innovation centers for technology and media companies in California, Washington state and Vancouver, British Columbia. The office occupancy rate at the end of the fourth quarter was 80.8%, down from 88% at the end of 2022.
On Feb. 12, Hudson Pacific Properties reported fourth-quarter operating results. FFO of $0.14 missed the consensus estimate of $0.15 and was well below Q4 2022 FFO of $0.49 per share. Since then, FFO has declined for five consecutive quarters. Revenues of $223.42 million missed the consensus estimate of $223.93 million and were 17.2% lower than fourth-quarter 2022 revenues of $269.93 million.
On February 20, Wedbush Securities analyst Richard Anderson downgraded Hudson Pacific Properties from Outperform to Neutral and lowered the price target from $11 to $7.50.
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Since Feb. 12, the stock price has fallen about 11%, from $8.17 to $7.25.
Healthcare Realty Trust Inc. human resources is a healthcare REIT based in Nashville, Tennessee, with 688 properties covering 40.3 million square feet in 35 states. It was founded in 1992 with 21 facilities and has evolved into a delivery model where 72% of its properties are multitenant outpatient medical services buildings on the campus of hospitals or other types of healthcare facilities. The third quarter occupancy rate was 85.2%.
In 2022, Healthcare Realty merged with Healthcare Trust of America in an $18 billion deal and became Healthcare Realty Trust. Major locations of its properties include Dallas, Seattle and Houston, Texas.
On February 16, Healthcare Realty Trust reported fourth-quarter operating results. FFO of $0.39 was in line with estimates but decreased from $0.42 in the same period last year. Revenues of $330.44 million missed estimates of $334.6 million and were below fourth-quarter 2022 revenues of $338.06.
Additionally, full-year 2024 FFO of $1.52-1.58 per share, with a midpoint of $1.55, was below analysts’ estimates of $1.57.
On February 20, Wedbush analyst Richard Anderson downgraded Healthcare Realty Trust from Outperform to Neutral and lowered the price target from $19 to $15.
Shares of Healthcare Realty fell from the pre-earnings announcement of $15.59 to the recent closing price of $14.36.
Digital Realty Trust Inc. DLR is a data center REIT headquartered in Austin, Texas, with more than 218,000 cross-connections across 300 facilities in 23 countries. It has over 5,000 customers, including established technology companies such as Nvidia Corp. NVDA, Oracle Corp. ORCL AND IBM IBM.
Digital Realty Trust reported fourth quarter 2023 operating results on February 15. FFO of $1.63 per share missed the consensus estimate of $1.64 per share and was lower than FFO of $1.65 dollars in the fourth quarter of 2022. On the bright side, revenues of $1.4 billion beat the estimate of $1.39 billion and were 13.54% better than revenues of $1.23 billion dollars. in the fourth quarter of 2022.
The full-year 2024 core FFO forecast of $6.60-6.75 was higher than 2023’s $6.59, but missed analysts’ estimates of $6.83. Full-year 2024 revenue of $5.5-5.65 billion also missed Street expectations of $5.76 billion.
The next day, Scotiabank analyst Maher Yaghi downgraded Digital Realty Trust from Sector Outperform to Sector Perform.
Digital Realty is up 22% over the past six months, but following the report and downgrade, it has fallen more than 8% from $148.61 to $136.22, with an intraday low of $134.75.
WP Carey Inc. WPC is a diversified net lease REIT based in New York City whose single-tenant properties include industrial units, warehouses, retail stores and self-storage. It was founded in 1973 and recently celebrated its fiftieth year of real estate investing.
WP Carey has 1,424 net leased properties with approximately 173 million square feet in 26 countries. Its portfolio includes 336 tenants from over 30 sectors and an excellent occupancy rate of 98.1%. However, this is down from 99.0% in 2023.
On February 9, WP Carey reported fourth-quarter operating results. It missed analysts’ estimates for both adjusted FFO (AFFO) and revenue. AFFO of $1.19 per share and revenue of $410.38 million fell short of expectations of $1.21 per share and $422.12 million. AFFO was also lower than $1.29 in the year-ago period, while revenue increased from $402.6 million in the fourth quarter of 2022.
WP Carey also announced its full-year 2024 AFFO per share of $4.65-4.75, with a midpoint of $4.70. The Street was expecting $4.72.
After the results were announced, the stock sold off, with the share price falling from a pre-announcement close of $61.35 to a three-day low of $54.72. The price then rebounded to close at $57.40 on February 16.
On February 12, Raymond James analyst RJ Milligan downgraded WP Carey from Outperform to Market Perform.
Many investors lost faith in WP Carey after it announced a spinoff and sale of its office properties in September, as well as a shocking dividend cut. Shares have fallen nearly 30% from their July 2022 high of $81.54.
It may be a while before these four REITs make substantial gains.
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