Not Sure About STAG Industrial’s Q3 Results

chart stag

Last week, STAG Industrial’s (NYSE:STAG) third quarter results were announced, and from a dividend generation ranking standpoint the figures were slightly better than their second quarter results. The best news is that the company’s FFO per share increased by a whopping 8.3 percent year over year. In addition, STAG’s core funds from operations increased by more than thirty percent. The company has also issued a large amount of equity over the past twelve months.

That being said, STAG Industrial does not demonstrate certain things that we see in other industrial stocks. A factor that we look for is a relatively strong same store NOI, a large factor in measuring internal growth strength. For example, the median sector figure, in Q2, was more than 5 percent. This is a big reason why industrial stocks have been our top fifth sector.

In comparison, STAG has shown a weaker same store NOI. The company has concentrated on acquiring business that are one hundred percent occupied. It is a natural factor that occupancy will decrease over time, which in turn weakens internal growth. In order to put this into perspective, amongst the eight industrial stocks we follow the second lowest same store NOI came in Q2 at approximately five percent. STAG Industrial’s same store NOI was one percent. (-0.4 percent in Q3).

STAG has enjoyed another piece of good news. The company’s retention rate rose to ninety percent after having dropped to twenty nine percent in the second quarter. The amount of expiring square footage has been more significant in Q3 than in Q2 resulting in a more robust Q3 retention figure. Also, STAG’s acquisition pacing continues strong, and their management team has lined up a pipeline that is greater than their market capitalization.

We are not sure if this will improve STAG Industrial’s position in our third quarter rankings. When compared to its industrial peers, the company’s metrics associated with both profitability and dividend distributions have been limited. If STAG had had this same performance in the second quarter, it would not have changed their bottom position at all.

Stay tuned! Our US equity REIT ranking is finally close to release.

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

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