US Earnings Season Commentary

Over 90% of US large-cap companies have reported their Q3 earnings results.

US REITs outperformed board equity markets in October and grew by 2.97% during the first half of November. The S&P 500 has gained +0.90% during the same period.

In Q3 the US market’s earnings growth has shown exceptional increase of +26.33% with an aggregate earnings surprise of +6.68% (Actual earnings/Estimated Earnings -1). Listed real estate however is the last in it’s sector peer group with only +8.93% earnings growth and +1.97% earnings surprise.

On the other hand, REITs are within the sales leaders with +13.09% following the +19.50% of Energy.

Source: Bloomberg.

We observe how the sector benefits from general economy growth while it’s fundamentals remain strong. The sector is boosted by increased consumer and business confidence and higher inflation. Interest rates on the other hand slightly decreased and the current US 10-year yield is at 3.08.

Overall demand for real estate has increased, reflected in strong sales growth figures and we see once again how the real estate market remains an accurate proxy of economy health and is directly linked to local economy and is weakly exposed to foreign markets.

We expect the FED to announce another rates hike in December with limited impact on the sector as fundamental metrics remain solid and attractive.