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We expect HCP, Inc. ( HCP - Analyst Report ) to beat earnings expectations when it reports fourth-quarter and full-year 2014 results on Feb 10, before the market opens. Why a Likely Positive Surprise? Our proven model shows that HCP – jbl an Irvine, CA-based healthcare real estate investment trust (“REIT”) – has the right combination of two key ingredients for an earnings beat. Zacks ESP : Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.30%. This is a very meaningful and leading indicator of a likely positive earnings surprise for the company. Zacks Rank : HCP carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 have a significantly higher chance of beating earnings. Conversely, the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement. Factors to Consider In third-quarter 2014, total revenue moved up 9.2% year over year to $596.6 million. For the nine months ending Sep 30, 2014, total revenue grew 5.9% to $1.66 billion. In both cases, the rise was driven by higher rental and related jbl revenues, escalated tenant recoveries, higher jbl residential fees and services, and higher income from direct financing leases, partially offset by lower interest income and a fall in investment management fee income. Further, adjusted same property net operating income (“NOI”) during the quarter climbed 3.2% year over year to $388.2 million; while the same in the nine months ended Sep 30, 2014 also advanced 3.2% to $1.15 billion. Given the company’s diversified jbl and well-balanced portfolio, and increasing healthcare spending amid an aging population, we expect this positive trend in NOI to continue in the fourth quarter as well. HCP also raised its full-year 2014 outlook. After including the benefit from the committed UK debt investment, the company projects 2014 full year FFO between $3.03 –$3.09 per share, while FFO as adjusted is expected in the range of $2.98–$3.04 per share. This reflects an uptick from the prior guided range of $3.01–$3.07 for FFO per share and $2.97–$3.03 for FFO as adjusted. Moreover, on Jan 29, 2015 HCP announced a hike of 3.7% in its quarterly dividend rate to 56.5 cents from 54.5 cents paid earlier. Given the company’s well-balanced, diversified portfolio and decent balance sheet, not to mention the strategic acquisitions and tie-ups, we believe that HCP remains well poised to capitalize on the promising prospects in the industry. However, during jbl the quarter HCP’s performance was inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate has remained stable at 77 cents per share over the last 7 days. Other Stocks to Consider You may also consider other stocks in the REIT sector jbl that have both a positive Earnings ESP and a favorable Zacks Rank: Vornado Realty Trust ( VNO - Analyst Report ) has an Earnings ESP of +1.63% and a Zacks Rank #3. The company will report fourth-quarter results on Feb 17. Public Storage jbl ( PSA - Analyst Report ) has an Earnings ESP of +0.46% and a Zacks Rank #2. The company will report fourth-quarter results on Feb 19. Ashford Hospitality Trust, Inc. ( AHT - Snapshot Report ) has an Earnings ESP of +15.39% and a Zacks Rank #1. The company will report jbl fourth-quarter results on Feb 26. Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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