Whitestone REIT :WSR-US: Earnings Analysis: Q1, 2016 By the Numbers

Whitestone REIT reports financial results for the quarter ended March 31, 2016.

We analyze the earnings along side the following peers of Whitestone REIT – Realty Income Corporation, Equity One, Inc. and Urstadt Biddle Properties Inc. Class A (O-US, EQY-US and UBA-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 25.44 million, Net Earnings of USD 2.11 million.
  • Gross margins widened from 45.11% to 46.77% compared to the same period last year, operating (EBITDA) margins now 30.06% from 30.28%.
  • Year-on-year change in operating cash flow of -43.82% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

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):

2015-03-31 2015-06-30 2015-09-30 2015-12-31 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 21.05 21.77 24.39 25.6 25.44
Revenue Growth (%YOY) 19.59 24.51 30.54 33.27 20.86
Earnings (mil) 1.6 1.4 1.54 1.85 2.11
Earnings Growth (%YOY) -34.41 14.39 47.19 120.21 31.64
Net Margin (%) 7.6 6.43 6.33 7.24 8.28
EPS 0.07 0.06 0.06 0.07 0.08
Return on Equity (%) 3.02 2.41 2.45 2.98 3.46
Return on Assets (%) 1 0.84 0.84 0.95 1.07

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Market Share Versus Profits

Revenues History
Earnings History

WSR-US‘s change in revenue this period compared to the same period last year of 20.86% 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 WSR-US is holding onto its market share. Also, for comparison purposes, revenues changed by -0.63% and earnings by 13.66% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Earnings Growth Analysis

The company’s earnings growth has been influenced by the year-on-year improvement in gross margins from 45.11% to 46.77%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

Gross Margin Versus EBITDA Margin

Cash Versus Earnings – Sustainable Performance?

Operating Cash Flow Growth Versus Earnings Growth

WSR-US‘s change in operating cash flow of -43.82% 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 earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 8.59% to 8.87% and (2) one-time items. The company’s pretax margins are now 9.25% compared to 8.63% for the same period last year.

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

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Company Profile

Whitestone REIT is a fully integrated real estate investment trust that owns, operates and redevelops Community Centered Properties. The company focuses on value creation in its community centers, concentrating on local service-oriented tenants. Its diversified tenant base provides service offerings including medical, education, casual dining, and convenience services. The company was founded on August 20, 1998 and is headquartered in Houston, TX.

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