KKR Real Estate Finance (KREF) Q4 earnings lag estimates

KKR Real Estate Finance (KREF) came out with quarterly earnings of $0.18 per share, missing Zacks consensus estimate of $0.51 per share. That compares to a loss of $0.05 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents a profit surprise of -64.71%. A quarter ago, this real estate finance company was expected to post a profit of $0.46 per share when it actually produced a profit of $0.50, delivering a surprise 8.70 %.

In the past four quarters, the company has exceeded consensus EPS estimates three times.

KKR Real Estate, which is part of the Zacks REIT and Equity Trust segment, posted revenue of $51.92 million for the quarter ended December 2022, beating Zacks’ consensus estimate of 5.97%. That compares to revenues of $42.45 million a year ago. The company has exceeded consensus revenue estimates three times in the past four quarters.

The sustainability of the immediate stock price movement based on recently released numbers and future earnings forecasts will primarily depend on management’s comments on the earnings call.

Shares of KKR Real Estate are up about 13% year-to-date compared to the S&P 500’s 7.1% gain.

What’s next for KKR Real Estate?

As KKR Real Estate has outperformed the market so far this year, the question on investors’ minds is: what’s next for the stock?

There are no easy answers to this key question, but one reliable metric that can help investors answer it is the company’s earnings outlook. This includes not only the current consensus earnings expectations for the upcoming quarter(s), but also how those expectations have changed recently.

Empirical research shows a strong correlation between short-term stock movements and trends in earnings estimate revisions. Investors can track these revisions on their own or rely on a proven scoring tool like Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Prior to this publication of the results, the trend of revisions of estimates for KKR Real Estate: unfavourable. While the magnitude and direction of estimate revisions may change following the release of the company’s earnings report, the current situation translates into a Zacks No. 4 (sell) ranking for the stock. Thus, stocks are expected to underperform the market in the near future. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how the estimates for the next few quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.49 on $49.62 million in revenue for the upcoming quarter and $1.96 on $201.43 million in revenue for the current fiscal year.

Investors should be aware that the outlook for the sector can also have a significant impact on stock performance. In terms of Zacks industry rankings, REIT and Equity Trust are currently in the bottom 27% of Zacks more than 250 industries. Our research shows that the top 50% of industries ranked by Zacks outperform the bottom 50% by a factor of more than 2 to 1.

Another stock in the same sector, Great Ajax (AJX), has yet to report results for the quarter ending December 2022.

This real estate investment trust is expected to post quarterly earnings of $0.19 per share in its next report, representing a year-over-year change of -40.6%. The consensus EPS estimate for the quarter remained unchanged for the past 30 days.

Great Ajax’s revenue is expected to be $9.77 million, down 31.4% from the year-ago quarter.

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