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Seeking Alpha’s Quant Rating system rates Host Hotels & Resorts (HST), Realty Income (O) and Kimco Realty (KIM) as top picks among the S&P 500 real estate stocks ahead of the Q2 earnings season.
Quant assigns grades according to quantitative measures, like valuation, earnings growth and recent stock performance, with the highest possible health score of 5.
HST gets a Quant score of 4.81, rating profitability as A-. Notably, the hotel REIT has beaten FFO estimates 63% of the time and revenue estimates 88% of the time in the last two years. For Q2, the consensus FFO estimate is $0.56 (+5.08% Y/Y) and the revenue estimate is $1.47B (+5.37% Y/Y).
Meanwhile, Quant gives O a score of 4.62, with an A grade for profitability. Realty Income turned in stronger-than-expected Q1 revenue and earnings, and reaffirmed its 2024 guidance for normalized FFO. For Q2, the consensus FFO estimate is $1.05 (+3.42% Y/Y) and the revenue estimate is $1.21B (+21.42% Y/Y).
KIM raised its 2024 FFO outlook after the retail REIT turned in stronger-than-expected results in Q1. Quant grades Kimco Realty’s profitability as B, and assigns the stock an overall score of 4.44.
Sector Health
The Real Estate Select Sector SPDR Fund ETF (NYSEARCA:XLRE) fell 1.11% in Q2 on the back of a weak April, while the broader S&P 500 index gained 4.14%.
Quant grades XLRE, holding 31 stocks in total, as Neutral, with a score of 3.26. XLRE holds a weightage of 2.10% on S&P 500.
The sector is estimated to post a 2.5% decline in Q2 earnings, but a 6.8% growth in revenue, a July 5 S&P 500 earnings scorecard from the London Stock Exchange said. The sector is expected to post combined earnings of $12.04B and revenue of $39.6B.
Industrial REIT Prologis (PLD), with the largest index weight of 11.69%, gets a score of 2.80 ahead of the Q2 earnings season.
Meanwhile, telecom tower REIT SBA Communications (SBAC) and Crown Castle (CCI) and office REIT BXP (BXP) ranked the least in the Quant chart. SBAC scored 1.21, CCI 1.55 and BXP 2.51.