Innovative Industrial Properties, Inc. (IIPR Quick QuoteIIPR - Free Report) , a leading real estate investment trust (REIT) specializing in the acquisition, ownership and management of specialized properties leased to experienced, state-licensed operators for their regulated cannabis facilities, is set to announce its second-quarter 2024 earnings results on Aug 5 after market close. 

In the last reported quarter, Innovative Industrial reported adjusted funds from operations (FFO) per share of $2.21, which missed the Zacks Consensus Estimate of $2.27. Results reflected lower-than-expected revenues.

Over the last four quarters, IIPR’s adjusted FFO per share surpassed the consensus mark on three occasions and missed once, with the average beat being 2.71%. 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

Innovative Industrial has grabbed much attention in the past as it combines the high growth potential of the cannabis industry with the stability of the real estate market. In this article, we'll delve into IIPR's performance in recent quarters and analyze the factors that may have contributed to its second-quarter 2024 results.

Factors at Play

In the second quarter of 2024, IIPR results are likely to be affected by a decline in contractual rent and property management fees received related to properties that IIPR took back possession of since March 2023. 

Moreover, continued inflation in input and labor costs is likely to have affected expenses in the quarter under consideration. Labor shortages and global supply-chain issues continue to adversely impact costs. This, along with pressure on pricing, is likely to have hampered profitability to some extent. 

However, an increase in contractual rent and property management fees, mainly due to contractual rent escalations and amendments to leases for additional improvement allowances at existing properties, is expected to have partially offset the negatives.

Projections

The Zacks Consensus Estimate for quarterly revenues is currently pegged at $78.35 million. The figure suggests a rise of 2.5% year over year.

Innovative Industrial Properties’ activities during the quarter in discussion were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the second-quarter FFO per share has been revised five cents south to $2.23 in the past month. Also, it suggests a 1.3% decrease year over year.

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 That Warrant a Look

Here are two stocks from the broader REIT sector — Simon Property Group, Inc. (SPG Quick QuoteSPG - Free Report) and Apple Hospitality REIT, Inc. (APLE Quick QuoteAPLE - 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.

Simon Property Group, slated to release quarterly numbers on Aug 5, has an Earnings ESP of +0.44% and carries a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Apple Hospitality REIT, scheduled to report quarterly numbers on Aug 5, has an Earnings ESP of +12.21% and carries a Zacks Rank of 2. 

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

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