Innovative Industrial Properties, Inc. (IIPR Quick QuoteIIPR - Free Report) is expected to report third-quarter 2022 results after market close on Nov 2. The company’s quarterly results are likely to display year-over-year growth in revenues and funds from operations (FFO) per share.

In the last reported quarter, this real estate investment trust (REIT), focused on the cannabis-centered real estate portfolio, delivered a surprise of 5.94% in terms of adjusted FFO per share.

Over the last four quarters, IIPR’s adjusted FFO per share surpassed the consensus mark, with the average beat being 2.62%. The graph below depicts the surprise history of the company:

Innovative Industrial Properties, Inc. Price and EPS Surprise

Innovative Industrial Properties, Inc. price-eps-surprise | Innovative Industrial Properties, Inc. Quote

Let’s see how things have shaped up before the earnings release.

Factors at Play

Innovative Industrial Properties, focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated state-licensed cannabis facilities, is likely to keep gaining from its acquisitions.

The legalization of marijuana for medical use across several U.S. states and recreational use in several states has opened opportunities for the cannabis industry. Therefore, IIPR has incentives to partner with experienced medical-use cannabis operators and serve as a vital source of capital by acquiring and leasing back their real estate assets.

Its strategy is to acquire existing, redeveloped and under-development industrial buildings, including enclosed greenhouse facilities.

This REIT’s expansion efforts continued in the third quarter too. During the said period, Innovative Industrial Properties acquired a Massachusetts property for $21.5 million and expanded its long-term real estate partnership with Curaleaf.

Innovative Industrial Properties is anticipated to have benefited from its expansion measures during the quarter under review on contributions from acquisitions.

Also, the leasing of new properties, additional tenant improvement allowances and construction funding at existing properties, resulting in adjustments to the base rent and contractual rental escalations at some properties, are likely to have benefited IIPR.

The Zacks Consensus Estimate for quarterly revenues is currently pegged at $68.6 million, suggesting a rise of 27.4% year over year.

However, inflation, supply-chain issues and labor shortages are likely to have affected expenses in the quarter under consideration.

Innovative Industrial Properties’ activities during the quarter in discussion were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the third-quarter FFO per share has been revised 3.3% downward in the past week. However, it calls for nearly 21.1% year-over-year growth.

Here Is What Our Quantitative Model Predicts:

Our proven model does not conclusively predict a surprise in terms of FFO per share for Innovative Industrial Properties this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an FFO beat. However, that’s not the case here.

Innovative Industrial Properties currently carries a Zacks Rank of 4 (Sell) and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some stocks from the broader REIT sector — Public Storage (PSA Quick QuotePSA - Free Report) , Extra Space Storage Inc. (EXR Quick QuoteEXR - Free Report) and Host Hotels & Resorts, Inc. (HST Quick QuoteHST - Free Report) — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.

Public Storage, slated to release quarterly numbers on Nov 1, has an Earnings ESP of +1.34% and carries a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Host Hotels & Resorts, scheduled to report quarterly numbers on Nov 2, currently has an Earnings ESP of +0.71% and carries a Zacks Rank of 3.

Extra Space Storage, slated to report third-quarter earnings on Nov 1, currently has an Earnings ESP of +1.31% and carries a Zacks Rank of 3.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.