Alexandria to Post Q1 Earnings: What's in the Cards for the Stock?

Alexandria Real Estate Equities Inc. ARE is scheduled to release its first-quarter 2025 results on April 28, after the closing bell. Its quarterly results are likely to reflect a decline in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Pasadena, CA-based life science real estate investment trust (REIT), focusing on collaborative life science, agtech and technology campuses in AAA innovation cluster locations, met the Zacks Consensus Estimate in terms of adjusted FFO per share. ARE’s performance in the quarter 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 has a decent surprise history. Over the preceding four quarters, its adjusted FFO per share surpassed the Zacks Consensus Estimate on two occasions, met once and missed in the remaining period, with the average beat being 0.54%. This is depicted in the graph below:

Alexandria Real Estate Equities, Inc. Price and EPS Surprise

Alexandria Real Estate Equities, Inc. price-eps-surprise | Alexandria Real Estate Equities, Inc. Quote

Factors at Play for ARE

ARE’s premium portfolio of Class A/A+ properties in the high-barrier-to-entry markets of the United States is well-positioned to benefit amid rising demand for life science assets due to the increasing need for drug research and innovation.

However, high interest expenses are likely to have been a spoilsport for Alexandria during the to-be-reported quarter. The company has a substantial debt burden, and its total debt as of Dec. 31, 2024, was approximately $12.69 billion. 

Also, the increase in the supply of laboratory properties has intensified competition and may have negatively impacted occupancy rates.

Projections for ARE 

The Zacks Consensus Estimate for Alexandria’s quarterly revenues currently stands at $758.5 million, suggesting a decrease of 1.38% from the prior-year period’s reported figure.

For the first quarter of 2025, our estimate indicates a 2.7% decrease in rental income and a 17% increase in Alexandria’s interest expenses on a year-over-year basis. Also, we expect the company’s occupancy of operating properties in North America to decrease 80 basis points year over year to 93.8%.

Alexandria’s activities in the to-be-reported quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly adjusted FFO per share has moved down marginally to $2.28 over the past month. Moreover, the figure suggests a 2.98% decrease from the year-ago quarter’s tally. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

What Our Quantitative Model Predicts for ARE

Our proven model does not conclusively predict a surprise in terms of FFO per share for Alexandria this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.

Alexandria currently has an Earnings ESP of +0.66% and carries a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are two stocks from the broader REIT sector — Host Hotels & Resorts HST and Vornado Realty Trust VNO — that you may want to consider, as our model shows that these have the right combination of elements to report a surprise this quarter.

Host Hotels & Resorts, scheduled to report quarterly numbers on April 30, has an Earnings ESP of +1.13% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vornado Realty Trust, slated to release quarterly numbers on May 5, has an Earnings ESP of +2.03% and carries a Zacks Rank of 3 at present.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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