Yahoo Finance What's in Store for Gladstone Commercial (GOOD) in Q1 Earnings?
Gladstone Commercial Corporation GOOD, a diversified REIT, is slated to report first-quarter 2024 earnings on May 6 after market close. In anticipation of the announcement, industry analysts and investors are eager to assess the company's performance and prospects in the current economic climate.
In the last reported quarter, this REIT, which focuses on acquiring, owning and operating net leased industrial and office properties across the United States, reported a surprise of 5.88% in terms of core funds from operations (FFO) per share. The quarterly results reflected a decrease in property operating expenses from successful real estate tax appeals.
Over the trailing four quarters, Gladstone Commercial beat the Zacks Consensus Estimate in terms of FFO per share on two occasions for as many misses, the average miss being 0.13%. This is depicted in the graph below:
Gladstone Commercial Corporation Price and EPS Surprise
Gladstone Commercial Corporation price-eps-surprise | Gladstone Commercial Corporation Quote
In this article, we will dive deep into the U.S. industrial and office real estate market environment and the company's fundamentals and analyze the factors that may have contributed to its first-quarter 2024 performance.
US Industrial and Office Real Estate Market in Q1
Per a Cushman & Wakefield CWK report, following two years of remarkable growth emerging from the pandemic, the U.S. industrial real estate market continues to cool off. Though tenant demand tapered off in the first quarter, it remains positive.
There was healthy new leasing activity throughout the first quarter. With 128.7 million square feet (msf) of transactions completed, quarterly new leasing activity was 3% higher than the 10-year pre-pandemic average from 2010 to 2019. Absorption slowed in the quarter but remained positive, with net absorption coming at 13.8 msf, down from 48 msf in the prior quarter and from the 77 msf recorded a year ago.
The overall vacancy rate is trending higher as new completions continue to surpass net absorption. The overall vacancy rate climbed an additional 60 basis points (bps) to reach 5.8%, propelled upward for the fifth consecutive quarter by the influx of new speculative supply. Despite being elevated, vacancy remains below its historical average of 7%. There is a moderation in rent growth, and industrial rents grew 6% annually in the first quarter of 2024 compared with 10% in 2023 and 20% in 2022.
Per another Cushman & Wakefield report, the first quarter of 2024 marked the ninth straight quarter for office demand being negative. Net absorption for the quarter was a negative 31 million square feet (msf), bringing the four-quarter rolling total to a negative 78 msf.
The first-quarter national vacancy rate reached 20.2%, increasing 70 basis points (bps) sequentially and 210 bps year over year. However, higher-quality assets have performed better, and class A vacancy declined quarter over quarter in 32 of the 93 U.S. markets tracked by Cushman & Wakefield. The national asking rent came in at $37.77 in the quarter.
Nonetheless, the Cushman & Wakefield report highlights that despite weaker trends at the national level, demand for office spaces outperformed in some markets, with 26 of the 90 U.S. markets tracked by the company reporting positive net absorption in the first quarter.
Projections for Q1 2024
In the first quarter, Gladstone Commercial is expected to benefit from its focus on investing in target markets over the past quarters, with an emphasis on industrial properties.
However, the lingering effects of the pandemic, substantial inflation with a corresponding rise in interest rates, and the geopolitical tensions and economic woes are likely to have cast a pall on the company’s performance in the first quarter.
The rising supply of industrial real estate and the continued choppiness in the office real estate market are expected to hinder the company’s growth tempo. High interest expenses are likely to have acted as a dampener.
The Zacks Consensus Estimate for first-quarter revenues is currently pegged at $36.41 million, which suggests a 0.38% year-over-year decrease.
Gladstone Commercial’s activities during the soon-to-be-reported quarter were adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the first-quarter FFO per share has been revised a cent upward to 34 cents over the past two months. Nevertheless, it suggests an 8.1% decrease year over year.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for Gladstone Commercial 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.
Gladstone Commercial currently carries a Zacks Rank of 3 and has an Earnings ESP of 0.00%. 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 — Medical Properties Trust MPW and Peakstone Realty Trust PKST — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
Medical Properties, slated to release quarterly numbers on May 9, has an Earnings ESP of +9.15% and carries a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Peakstone Realty Trust, scheduled to report quarterly numbers on May 7, has an Earnings ESP of +8.28% and sports a Zacks Rank of 1.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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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Medical Properties Trust, Inc. (MPW) : Free Stock Analysis Report
Gladstone Commercial Corporation (GOOD) : Free Stock Analysis Report
Cushman & Wakefield PLC (CWK) : Free Stock Analysis Report
Peakstone Realty Trust (PKST) : Free Stock Analysis Report
