Photo by Michael Edwards
Real Estate Investment Trusts (REITs) closed the week slightly lower than the previous one as fourth-quarter earnings failed to impress investors.
Challenges in Q4 Earnings
AGNC Investment’s (AGNC) earnings continued to decline in the quarter, while Weyerhaeuser (WY) witnessed a decrease in earnings both sequentially and from a year ago. Crown Castle (CCI) managed to beat Wall Street’s revenue expectations, but only renewed its 2024 guidance, with anticipated reductions in site rental revenues and AFFO.
On the other hand, Office REIT SL Green Realty (SLG) distinguished itself by exceeding revenue expectations and elevating its 2024 guidance, influenced by gains from debt repayment. However, its Q4 earnings took a hit from charges.
Market Performance
The FTSE Nareit All Equity REITs saw a decline of 0.78% from the previous week, closing at $730.34. Similarly, the Dow Jones Equity All REIT Total Return Index dropped 0.80% to $2,382. Meanwhile, the FTSE Nareit Mortgage REITs index surged by 0.73% to $2.77, driven by expectations of a rate cut based on favorable economic data ahead of the next Federal Open Market Committee meeting scheduled for Jan. 30-31.
In contrast, the S&P 500 rose by 1.06%, supported by the performance of technology and energy stocks. Nonetheless, despite rate cut expectations, the Real Estate Select Sector SPDR ETF fell by 0.54% to close at $38.49.
Notable Market Movers
Mortgage REIT Arbor Realty Trust (ABR) and net-lease REIT Spirit Realty Capital (SRC), fresh from their merger with Realty Income, experienced significant declines. Conversely, Power REIT (PW) was a standout gainer for the week.
Subsector Performance
Diversified REITs took the hardest hit among subsectors, followed by Residential and Health Care. Data centers and Office REITs, however, saw the most substantial gains.
Conclusion
In essence, Q4 earnings have left the REITs market in a state of unrest, with some hopeful signs in the mortgage sector but setbacks in other areas. As the market recalibrates in reaction to these financial reports, investors are bracing for near-term volatility and uncertainty.
It remains to be seen how the looming Federal Open Market Committee meeting and potential rate cut will impact the REITs market, as well as whether individual REITs can regain their footing following the recent downturn.
