Can DDR Corp. (DDR) Beat This Earnings Season? - Analyst Blog

DDR Corp. DDR is set to report its first-quarter 2014 results on May 6, after the closing bell. In the prior quarter, it delivered a positive earnings surprise of 0.00%. This retail real estate investment trust (REIT) has an expected FFO growth rate of 6.83%.

Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model conclusively shows that DDR will beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP:The company's Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +7.14%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank: DDR carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks #1, 2 or 3 have a significantly higher chance of beating earnings.

This combination of DDR's Zacks Rank and Earnings ESP makes us confident about a positive earnings beat.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

What is Driving the Better-than-Expected Earnings?

Improving core operating fundamentals, aggressive capital recycling program and a sound balance sheet position with adequate liquidity are expected to lead to a positive earnings surprise in first-quarter 2014. Also, DDR's high end tenant base of leading retailers – such as Bed Bath & Beyond Inc. BBBY – promise bright prospects.

As a matter of fact, in the first quarter of 2014, DDR divested 14 non-prime assets and generated $142 million from it as its share. The generated proceeds are intended to partly fund the buyout of 3 prime power centers in downtown Chicago, Colorado and Northern California. Such activities bode well for DDR's long-term growth.

Other Stocks to Consider

DDR is not the only firm looking up this earnings season. Other stocks in the retail REIT sector having the right combination of the two key ingredients, which are slated to report on May 7, are:

Kimco Realty Corporation KIM, with an Earnings ESP of +2.94% and a Zacks Rank #3.

Regency Centers Corporation REG, with an Earnings ESP of +1.54% and a Zacks Rank #3.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.