It is always risky for an investor to buy or sell shares of a stock right before an earnings report because no one can predict with 100% accuracy how a company will perform, nor is it possible to gauge Wall Street’s reaction to the news.
When a company misses earnings estimates, it is sometimes overlooked if revenues exceed estimates. Other times, earnings may beat estimates, but revenue falls short of expectations and this leads to a sell-off in the share price. Another factor is whether the stock appears to be overbought or oversold. A stock is perfectly overbought and the loss of earnings will trigger a lot more selling than if the stock had actually been beaten in price.
Investors must decide whether to continue holding the stock after the earnings disappointment or sell quickly before any further decline. It usually pays not to panic sell because Wall Street’s overreaction is often followed by a price bounce again and investors can then sell at a better price or continue to hold if they have confidence in the company’s ability to do better in the future.
Alternatively, a significant drop in price could represent an opportunity for investors who have patiently waited for a more favorable price point to acquire shares in the stock. But potential buyers also need to weigh potential risks against rewards – will earnings disappointment lead to further downside or instead provide a short opportunity to invest in stocks at a lower price and higher dividend yield?
Take a look at three real estate investment funds (REITs) that were just beaten by Wall Street after disappointing second-quarter operating results.
Medicinal Properties Fund (NYSE: MPW) is a health care fund based in Birmingham, Alabama that owns and operates 444 public acute care and other properties across the United States and nine other countries, with locations in Europe and Australia. She has a portfolio of $19.2 billion. Acute care hospitals account for 64% of its portfolio, and about two-thirds of its properties are located in the United States.
In July, Medical Properties Trust sold three public acute care hospitals in Kansas and Texas for about $100 million.
On August 8, Medical Properties Trust reported its operating results for the second quarter. FFO of $0.48 did not beat estimates of $0.70, although it was a 4.35% increase in FFO of $0.46 in Q2 2022. 15.7% below revenue of $400.23 million in the second quarter of 2022.
The Medical Properties Trust also reported a net loss of $42 million, versus net income of $190 million a year ago, due to the early termination of five hospital leases in Utah and a $95 million direct rent write-off.
Medical Properties Trust has performed well over the past three months, rising from just under $7 a share to a recent high of $10.74. But after the earnings announcement, Medical Properties Trust shares fell more than 14% in one day, closing at $8.68.
Healthcare Realty Trust Inc. (NYSE:HR) is a healthcare REIT located in Nashville, Tennessee that owns and develops outpatient medical facilities throughout the United States. 42 million square feet in 714 properties in 35 states. Eighty-five percent of Healthcare Realty’s properties are located in larger cities such as Atlanta, Boston, Dallas, Houston, and Los Angeles.
On August 7, shares of Healthcare Realty Trust closed at $19.73. The next morning, earnings are announced before the opening bell. An FFO of $0.39 per share missed estimates of $0.40 and was 13.33% lower than an FFO of $0.45 per share in Q2 2022. Revenue of $338.14 million beat agreed estimates of $333.6 million by 1.36% and was an increase of 132.68% on revenue of $145.33. million in the second quarter of 2022.
The stock opened lower at $19.26 and fell to $18.39, before closing at $18.50, down 6.23%, thanks to disappointment on Wall Street.
Healthcare Realty pays a quarterly dividend of $0.31 per share and an annual dividend of $1.38 now yields 7.45%.
Extra space storage company (NYSE:EXR) is a Salt Lake City self-storage storage trust with more than 3,500 properties comprising 270 million square feet of rentable storage space across 43 states. Life Storage Inc. has been acquired by Washington, D.C. (NYSE: LSI) in a deal that closed in July and significantly boosted its portfolio.
On August 3, Extra Space Storage reported its operating results for the second quarter. FFO of $2.06 missed Street’s estimate of $2.15 and was also below FFO of $2.13 in Q2 2022. Revenue of $440.75 million missed the estimate of $450.93 million but was an 8.01% increase over revenue of $408.04 million in Second quarter of 2022. 2022.
The share price had been falling for two weeks on fears of falling storage unit rents, but it appeared to have leveled off after the closing bell on the day the earnings were announced. Investors may have been feeling optimistic because the stock was already oversold. Extra Space Storage closed that day at $139.45.
Shares fell as low as $123.67 the day after the earnings were announced and closed down 9.8% at $125.70. The stock has since rebounded to a recent closing price of $128.85.
But one investor’s loss can often be another’s gain, and Extra Storage is now close to 40% below its January 2022 price. Investors may want to keep a close eye on this stock.
REIT Weekly ReportREITs: REITs are one of the most misunderstood investment options, which makes it difficult for investors to spot amazing opportunities until it is too late. Benzinga’s in-house real estate research team works hard to identify the greatest opportunities in today’s market, which you can access for free by subscribing to REIT Weekly Report.
Never miss real-time alerts on your stocks – join Benzinga Pro Free! Try the tool that will help you invest smarter, faster and better.
This article Disappointing Earnings Just Broke These 3 Real Estate Funds: What Should Investors Do? appeared in the original Benzinga.com
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.