It has been about a month since the last earnings report for Alexandria Real Estate Equities (ARE). Shares have added about 3.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Alexandria Real Estate Equities due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Alexandria reported fourth-quarter 2024 adjusted FFO (AFFO) per share of $2.39, meeting the Zacks Consensus Estimate. The reported figure outpaced the year-ago quarter’s AFFO per share of $2.28 by 4.8%.
Results reflected a rise in revenues, aided by decent leasing activity and rental rate growth. However, higher interest expenses year over year undermined the results to some extent. Alexandria provided its 2025 outlook.
Total revenues of $788.9 million increased 4.2% year over year. However, the figure marginally missed the consensus estimate of $789.1 million.
For 2024, the company reported an AFFO per share of $9.47, up 5.6% from the previous year. The figure was in line with the Zacks Consensus Estimate. Total revenues of $3.12 billion increased 8% year over year.
Behind the Headlines
Alexandria’s total leasing activity aggregated 1.3 million rentable square feet (RSF) of space in the fourth quarter, reflecting healthy demand for its high-quality office/laboratory space. Of this, lease renewals and re-leasing of space amounted to 1.0 million RSF, while leasing of development and redevelopment space totaled 12,999 RSF.
The company registered rental rate growth of 18.1% during the quarter. On a cash basis, the rental rate increased 3.3%. The occupancy of operating properties in North America was 94.6% as of Dec. 31, 2024, down 10 basis points (bps) from the prior quarter and unchanged from the year-ago quarter.
On a year-over-year basis, same-property NOI increased 0.6%. It improved 6.3% on a cash basis.
In the reported quarter, investment-grade or publicly traded large-cap tenants accounted for 52% of the annual rental revenues in effect. The weighted average remaining lease term of all tenants is 7.5 years. For Alexandria’s top 20 tenants, it is 9.3 years. As of Dec. 31, 2024, the tenant receivable balance was $6.4 million.
For 2024, Alexandria completed acquisitions worth $249.4 million and dispositions worth $1.38 billion. During the fourth quarter, Alexandria placed into service development and redevelopment projects aggregating 602,593 RSF, which are 98% occupied across multiple submarkets, delivering $55 million of incremental annual NOI.
However, interest expenses jumped significantly year over year to $55.7 million.
Liquidity
The company exited the fourth quarter of 2024 with cash and cash equivalents of $552.1 million, down from $562.6 million as of Sept. 30, 2024. It had $5.7 billion of liquidity at the end of the reported quarter.
The net debt and preferred stock to adjusted EBITDA was 5.2x, and the fixed-charge coverage was 4.3x on an annualized basis. Its weighted average remaining term of debt was 12.7 years.
2025 Guidance
Alexandria provided its 2025 AFFO per share guidance in the range of $9.23-$9.43.
The company expects occupancy of operating properties in North America to be between 91.6% and 93.2%, with rental rate increases for lease renewals and re-leasing of space of 9-17%%. Same-property NOI growth on a cash basis is projected in the range of negative 1.
Dispositions and sales of partial interests are estimated between $1.2-2.2 billion. Acquisitions and other opportunistic uses of capital are estimated at $100 million at midpoint.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Alexandria Real Estate Equities has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Alexandria Real Estate Equities has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Alexandria Real Estate Equities belongs to the Zacks REIT and Equity Trust - Other industry. Another stock from the same industry, Prologis (PLD), has gained 2% over the past month. More than a month has passed since the company reported results for the quarter ended December 2024.
Prologis reported revenues of $1.94 billion in the last reported quarter, representing a year-over-year change of +10.3%. EPS of $1.37 for the same period compares with $1.26 a year ago.
Prologis is expected to post earnings of $1.38 per share for the current quarter, representing a year-over-year change of +7.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.2%.
Prologis has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.
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