Three REITs That Beat Estimates And Received Analyst Upgrades

Within the past two weeks, many real estate investment trusts (REITs) have defied lowered expectations from Wall Street by announcing third-quarter earnings that either met or exceeded the estimates or showed improvement from the third quarter of 2022.

Share prices usually rise when companies report improved earnings, and if analyst upgrades follow, they often boost the price even further.

Take a look at three REITs, from three different REIT sub-sectors that beat consensus estimates and have received analyst upgrades.

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Welltower Inc. WELL is a Toledo, Ohio-based healthcare REIT that owns interests in housing for seniors, post-acute communities and outpatient medical properties. It does this by providing capital to the operators who run these facilities. Welltower was founded in 1970 under the original name of Health Care Fund and was incorporated as a REIT in 1985. Welltower is a member of the S&P 500.

Welltower has 2,017 properties consisting of senior housing, outpatient medical and long-term/post-acute care across the U.S.  

On Oct. 30, Welltower reported its third-quarter operating results. Funds from operations (FFO) of $0.92 per share beat the estimates of $0.89 and also bested its FFO of $0.84 in the third quarter of 2022. Revenue of $1.66 billion beat the consensus estimate of $1.62 billion and was a 12.65% increase over third-quarter 2022 revenue of $1.47 billion. In addition, Welltower raised its guidance for full-year FFO from $3.51-$3.60 to $3.59-$3.63.

On Nov. 6, Welltower announced the offering of 17.5 million shares of its common stock to Bank of America Securities and Goldman Sachs & Co. in an underwritten public offering related to its previously filed shelf registration statement. Welltower is also granting underwriters an option to purchase up to 2.625 million additional shares. Proceeds from the sale will be used for the acquisition of more senior housing and skilled nursing properties.

Analysts like what they are seeing from Welltower. On Nov. 9, Raymond James analyst Jonathan Hughes upgraded Welltower from Outperform to Strong Buy and raised the price target from $95 to $101.

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Other analysts have recently been upbeat about Welltower as well. In early October, Wedbush Securities analyst Richard Anderson maintained a Neutral rating on Welltower but raised his price target from $83 to $90. On Oct. 19, KeyBanc Capital Markets Inc. analyst Todd Thomas maintained an Overweight rating on Welltower and raised the price target from $80 to $90. 

Essex Property Trust Inc. ESS is a San Mateo, California-based residential REIT that acquires, develops and manages multifamily apartment communities on the U.S. West Coast. Its portfolio includes 252 apartment communities, with approximately 62,000 apartment units in eight California and Washington markets.

Essex was founded in 1971 and had its initial public offering (IPO) in 1994 at $19.50 per share. With a recent closing price of $210.88, Essex has demonstrated its ability to appreciate over the long term. It's been a member of the S&P 500 since 2014 and is an S&P Dividend Aristocrat with 29 consecutive years of increasing cash dividends.

On Oct. 26, Essex Property Trust reported FFO of $3.78 per share, a penny above analysts' expectations and a solid improvement from FFO of  $3.69 in the third quarter of 2022. Revenue of $416.4 million missed the estimate of $419.57 million but was an improvement from revenue of $406.86 million in the third quarter of 2022.

Despite the slight revenue miss, analysts were impressed. On Nov. 9, BMO Capital Markets analyst John Kim upgraded Essex Property Trust from Underperform to Market Perform and announced a $225 price target. On Oct. 30, RBC Capital Markets analyst Brad Heffern maintained an Outperform rating on Essex while lowering the price target from $241 to $235.

Rexford Industrial Realty Inc. RXR is a Los Angeles-based industrial REIT that owns or manages 371 properties with 45 million square feet concentrated in Southern California's high-growth areas. Founded in 2001, it's a member of the S&P 400 and its market capitalization is $9.5 billion.

On Oct. 18, Rexford Industrial announced its third-quarter operating results. FFO of $0.56 per share beat the consensus estimate by a penny and was 12% above FFO of $0.50 per share in the third quarter of 2022, Revenue of $204.21 million beat the estimate of $200.91 million and was also 25.61% above $162.58 million in the third quarter of 2022.

On Nov. 8, Scotiabank analyst Greg McGinniss upgraded Rexford Industrial from Sector Perform to Sector Outperform and announced a $55 price target. From its recent closing price of $45.67, that represents a potential 20.4% increase.

Other analysts are also positive about Rexford Industrial. On Oct. 23, Truist Securities Inc. analyst Anthony Hau maintained a Buy on it while lowering the price target from $56 to $49. On Oct. 19, Stifel analyst Stephen Manaker maintained Rexford with a Buy rating while lowering the price target from $60 to $56.

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