American Assets Trust, Inc. :AAT-US: Earnings Analysis: Q3, 2016 By the Numbers : November 14, 2016

American Assets Trust, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of American Assets Trust, Inc. – Vornado Realty Trust, Washington Real Estate Investment Trust, VEREIT, Inc. Class A, EPR Properties, Boston Properties, Inc. and Federal Realty Investment Trust (VNO-US, WRE-US, VER-US, EPR-US, BXP-US and FRT-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 75.08 million, Net Earnings of USD 8.47 million.
  • Gross margins narrowed from 42.31% to 39.96% compared to the same period last year, operating (EBITDA) margins now 39.33% from 42.32%.
  • Year-on-year change in operating cash flow of 18.19% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 75.08 70.92 69.93 70.81 70.59
Revenue Growth (%YOY) 6.36 7.34 7.03 6.52 5.92
Earnings (mil) 8.47 7.6 7.65 8.21 13.56
Earnings Growth (%YOY) -37.52 -12.74 -4.68 16.91 111.34
Net Margin (%) 11.29 10.72 10.94 11.6 19.21
EPS 0.19 0.17 0.17 0.18 0.3
Return on Equity (%) 4.18 3.74 3.71 3.95 6.6
Return on Assets (%) 1.71 1.54 1.55 1.65 2.73

Access our Ratings and Scores for American Assets Trust, Inc.

Market Share Versus Profits

Revenues History
Earnings History

AAT-US‘s change in revenue this period compared to the same period last year of 6.36% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that AAT-US is holding onto its market share. Also, for comparison purposes, revenues changed by 5.86% and earnings by 11.51% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 42.31% to 39.96%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 42.32% to 39.33% in this time frame. For comparison, gross margins were 39.62% and EBITDA margins were 38.59% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

AAT-US‘s change in operating cash flow of 18.19% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 20.98% to 16.56% and (2) one-time items that contributed to a decrease in pretax margins from 27.46% to 16.60%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for American Assets Trust, Inc.

Company Profile

American Assets Trust, Inc. is a full service, vertically integrated and self-administered real estate investment trust. Its portfolio is comprised of retail shopping centers; office properties; a mixed-use property and a retail shopping center; and multifamily properties. The company operates through four segments: Retail, Office, Multifamily and Mixed-Use. The Retail segment includes rental of retail space. The Office segment includes rental of office space. The Multifamily segment includes rental of apartments. The Mixed-Use segment includes rental of retail space and other tenant services. American Assets Trust was founded on July 16, 2010 and is headquartered in San Diego, CA

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