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Majority of office, timber REITs surpass analysts' earnings estimates for Q2

Among the 147 publicly traded U.S. real estate investment trusts analyzed by S&P Global Market Intelligence, 78 topped their consensus second-quarter S&P Global Market Intelligence earnings estimate, while 34 met analyst expectations and 35 fell short.

The analysis included U.S. equity real estate investment trusts that trade on the Nasdaq, NYSE or NYSE American with market caps greater than $200 million and three or more S&P Global Market Intelligence earnings estimates for the three months ended June 30, 2019.

Three timber REITs — Weyerhaeuser Co., PotlatchDeltic Corp. and Rayonier Inc. — were among those with the largest estimate beats. Weyerhaeuser exceeded its consensus second-quarter EPS estimate by 60%, the largest beat of all analyzed REITs. However, the figure represents a 63.6% drop year over year, excluding the impact of certain after-tax special items.

Timber demand was low during the quarter as homebuilding activity was constrained in key areas across the country due to record-setting precipitation, Weyerhaeuser CEO Devin Stockfish said on the REIT's earnings call, according to a transcript.

Farmland REIT Gladstone Land Corp.'s core funds from operations came in at 11.9 cents per share for the quarter, surpassing its consensus estimate by 50% — the second-largest beat of the quarter.

Three office-focused REITs were also among the largest beats. Equity Commonwealth topped its consensus FFO-per-share estimate by 37.5%, while Office Properties Income Trust and City Office REIT Inc. exceeded analyst expectations by 19.6% and 17.2%, respectively.

At the other end of the spectrum, single-family rental REIT Front Yard Residential Corp. reported core FFO of 5 cents per share for the quarter, lower than its consensus estimate of 9 cents per share.

Front Yard CEO George Ellison said in the REIT's second-quarter earnings release that operational challenges stemming from the transfer of its externally managed homes onto its internal platform impacted results for the quarter. The second quarter marked the first time Front Yard had direct control over its rental portfolio, and Ellison noted that the REIT is already taking steps to address the new challenges associated with the transfer and expects to deliver stronger results going forward.

Colony Capital Inc. and regional mall REIT Pennsylvania Real Estate Investment Trust were also among the largest misses of the group for the quarter, falling short of consensus analyst estimates by 38.9% and 24.1%, respectively.

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