The first-quarter earnings season is in progress, and investors can be lured by the profits of companies that have already released their quarterly figures. However, instead of buying those stocks, positioning your portfolio with stocks likely to surpass estimates can lead to better returns. An earnings beat often acts as a catalyst, boosting investor confidence and driving the stock price higher.
This is likely to be reflected in the earnings releases of Welltower Inc. WELL, Equinix, Inc. EQIX, Equity Residential EQR and W. P. Carey Inc. WPC.
Although the current interest rate environment may not seem favorable in the short term, maintaining a focus on REITs remains a strategic choice. As providers of the real estate backbone for various economic activities — both physical and digital — REITs contain areas of resilience, even during tough market conditions. Let’s take a closer look at the industry's fundamentals to identify sectors that are demonstrating strength.
Industry Fundamentals
For example, for REITs dealing with residential real estate, we note that, per RealPage data, the first quarter of 2025 brought a wave of strong apartment demand, offering a lift to occupancy and rent growth as the supply surge begins to wane. From January through March 2025, more than 138,000 market-rate apartment units were absorbed nationally. Combined with the robust demand seen over the last three quarters of 2024, annual absorption reached nearly 708,000 units. Demand in the year-ending first quarter of 2025 exceeded concurrent supply, with nearly 577,000 units being delivered in the said period.
Occupancy rose modestly to 95.2% in March, the highest reading since October 2022, but still within long-term norms. Rent growth has also regained traction. Effective rents rose 0.75% in March and 1.1% in the year-ending March 2025 — the highest 12-month reading since June 2023. The average effective rent was $1,848. However, the recovery is regionally uneven.
Moreover, per a Cushman & Wakefield report, in the first quarter of 2025, the U.S. industrial real estate market showed resilience despite tariff uncertainty, with steady demand. Vacancy rates continued to rise, while rent growth moderated. The development pipeline thinned, with quarterly deliveries hitting a four-year low. The first quarter saw net absorption of 23.1 million square feet (msf), matching the level recorded during the same period last year.
The overall vacancy rate increased 30 basis points (bps) quarter over quarter to 7% in the first quarter and marked the highest level since 2014. This was largely due to vacant speculative deliveries coupled with some occupier dispositions. While industrial rents are still growing at a healthy year-over-year pace of 4.3%, an increasing number of markets saw declines this quarter. As a result, the national average rent has remained flat at $10.11 per square foot since the end of 2024.
In the healthcare real estate sector, demand is being fueled by the aging U.S. population and the corresponding increase in healthcare spending by this demographic, which typically exceeds that of the general population. Moreover, limited new supply in the market is likely to have contributed to a supportive operating environment for these properties. For data center real estate, enterprises and service providers’ continued efforts to integrate artificial intelligence (AI) into their strategies and offerings and advance their digital transformation agendas are keeping the demand high.
The Zacks Methodology
Picking the right stock could be difficult unless one knows the proper method. To make the task simple, we rely on the Zacks methodology, combining a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP.
Our proprietary methodology, Earnings ESP, shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Research shows that for stocks with this combination of the Zacks Rank and ESP, chances of a positive earnings surprise are as high as 70%.
Here are four REITs that have the right combination of elements to deliver positive surprises this season.
Welltower currently carries a Zacks Rank of 2 and has an Earnings ESP of +1.69% for the quarter under review. Over the trailing four quarters, Welltower’s normalized FFO per share beat the Zacks Consensus Estimate on each occasion, the average beat being 5.02%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Welltower owns a diversified portfolio in the healthcare real estate industry in the major, high-growth markets of the United States, Canada and the U.K. During the first quarter, the company’s senior housing operating portfolio is likely to have continued to benefit from an aging U.S. population and a rise in healthcare expenditure by this age cohort, which is usually on the higher end compared with the general population. In addition, muted new supply is expected to have provided a favorable operating environment for this portfolio. Further, Welltower’s long-term leases with its healthcare management companies or operators are anticipated to have led to stable revenue generation, boosting its top line. (Read more: Welltower Gears Up to Report Q1 Earnings: What's in the Cards?)
Welltower is scheduled to release first-quarter earnings on April 28, after market close.
The Zacks Consensus Estimate of $2.37 billion for quarterly revenues suggests a 27.6% increase year over year. The Zacks Consensus Estimate for first-quarter normalized FFO per share is pegged at $1.15. The figure indicates an increase of 13.9% from the year-ago reported number. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Welltower Inc. Price and EPS Surprise
Welltower Inc. Price and EPS Surprise
Welltower Inc. price-eps-surprise | Welltower Inc. Quote
Equinix holds a Zacks Rank #3 and an Earnings ESP of +1.41% at present. Over the trailing four quarters, EQIX’s AFFO per share surpassed the consensus estimate on three occasions and missed once, the average beat being 2.43%. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the first quarter of 2025, Equinix is likely to have benefited from the solid demand for interconnected data center infrastructure. Enterprises and service providers’ continued efforts to integrate artificial intelligence (AI) into their strategies and offerings and advance their digital transformation agendas are likely to keep demand up in the upcoming years. The company’s recurring revenue model, which comprises colocation, related interconnection and managed IT infrastructure services, is expected to have supported stable cash flows in the to-be-reported quarter, boosting the data center REIT’s top line. (Read more: Equinix to Post Q1 Earnings: What's in Store for the Stock?)
Equinix is scheduled to report its quarterly figures on April 30, after market close.
The Zacks Consensus Estimates for revenues stands at $2.22 billion, indicating an increase of 4.18% from the year-ago period’s reported figure. The consensus mark for EQIX’s quarterly AFFO per share is pegged at $8.96, suggesting a 1.13% jump from the prior-year quarter’s reported figure.
Equinix, Inc. Price and EPS Surprise
Equinix, Inc. Price and EPS Surprise
Equinix, Inc. price-eps-surprise | Equinix, Inc. Quote
Equity Residential carries a Zacks Rank of 3 and has an Earnings ESP of +0.75 % for the to-be-reported quarter at present. Over the trailing four quarters, Equity Residential surpassed the Zacks Consensus Estimate on two occasions for as many in-line performances, the average positive surprise being 0.81%.
Amid the robust demand, Equity Residential’s quarterly results are likely to receive a boost from its strategic portfolio diversification across urban and suburban markets. Its focus on higher-income renters — a segment marked by lower unemployment and greater economic stability — has served as a significant strength. With a strong balance sheet, Equity Residential leverages technology, scale and operational efficiency to fuel growth. Its strong financial position is expected to support ongoing development initiatives. (Read more: Is a Beat in Store for Equity Residential Stock in Q1 Earnings?)
Equity Residential is slated to release earnings results on April 29, after market close.
Currently, the Zacks Consensus Estimate for the company’s quarterly revenues stands at $766.82 million, which indicates a 4.93% increase year over year. The consensus mark for the quarterly normalized FFO per share is pegged at 93 cents.
W. P. Carey holds a Zacks Rank #2 and an Earnings ESP of +0.56% at present. Over the trailing four quarters, WPC’s core FFO per share surpassed the Zacks Consensus Estimate twice, met once and missed in the remaining period.
In the first quarter, W.P. Carey’s performance is likely to have benefited from its high-quality, mission-critical, diverse, single-tenant, net lease commercial real estate portfolio. As such, due to the inherent nature of its portfolio, the REIT is likely to have enjoyed higher occupancy and generated better risk-adjusted returns. Moreover, the company’s specialty in long-term sale-leaseback transactions with contractual rental bumps and strategic portfolio rebalancing efforts is likely to have collectively led to steady revenue generation during the quarter. (Read more: W.P. Carey to Report Q1 Earnings: What's in the Cards for the Stock?)
W. P. Carey is scheduled to report its quarterly figures on April 29, after market close.
The Zacks Consensus Estimate for first-quarter total revenues is pegged at $418.2 million, indicating a rise of 7.29% from the year-ago reported number. The consensus mark for the quarterly FFO per share is pegged at $1.19, suggesting a 4.39% increase year over year.
W.P. Carey Inc. Price and EPS Surprise
W.P. Carey Inc. Price and EPS Surprise
W.P. Carey Inc. price-eps-surprise | W.P. Carey Inc. Quote
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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