Whitestone REIT :WSR-US: Earnings Analysis: Q2, 2016 By the Numbers : August 10, 2016

Whitestone REIT reports financial results for the quarter ended June 30, 2016.

We analyze the earnings along side the following peers of Whitestone REIT – Realty Income Corporation, Equity One, Inc., One Liberty Properties, Inc., Saul Centers, Inc., EPR Properties, Alexander’s, Inc. and Ramco-Gershenson Properties Trust (O-US, EQY-US, OLP-US, BFS-US, EPR-US, ALX-US and RPT-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 24.52 million, Net Earnings of USD 1.31 million.
  • Gross margins narrowed from 45.15% to 44.90% compared to the same period last year, operating (EBITDA) margins now 28.48% from 28.45%.
  • Year-on-year change in operating cash flow of 34.22% 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):

2015-06-30 2015-09-30 2015-12-31 2016-03-31 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 21.77 24.39 25.6 24.84 24.52
Revenue Growth (%YOY) 24.51 30.54 33.27 18.04 12.62
Earnings (mil) 1.4 1.54 1.85 1.95 1.31
Earnings Growth (%YOY) 14.39 47.19 120.21 21.95 -6.72
Net Margin (%) 6.43 6.33 7.24 7.85 5.32
EPS 0.06 0.06 0.07 0.07 0.05
Return on Equity (%) 2.41 2.45 2.98 3.21 2.17
Return on Assets (%) 0.84 0.84 0.95 1 0.67

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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 12.62% 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 -1.31% and earnings by -33.08% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Earnings Growth Analysis

The company’s year-on-year earnings decline was driven by the drop in gross margins from 45.15% to 44.90%. This drop in earnings would have been worse were in not for operational cost control activities, which helped the operating margins (EBITDA margins) improve from 28.45% to 28.48%. For comparison purposes, gross margins were 45.49% and EBITDA margins were 30.78% in the previous period.

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 34.22% 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.


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 6.97% to 5.96% and (2) one-time items that contributed to a decrease in pretax margins from 7.71% to 6.27%

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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