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The last big week of the BMR 3Q19 season has begun with 10 of our stocks chiming in between now and Friday morning. So far, so good.


Even a small upside surprise from Shutterstock (SSTK: $43, up 3% yesterday) this morning will be a big boost to our overall score for the season. We're looking for $0.18 per share in profit here, which translates to a 55% decline from last year . . . so even an extra $0.01 can make a big difference. (We aren't concerned about the profit dip. It's built into our sense of management's strategic plan, and besides, this quarter is all about hitting the $160 million revenue mark.)


But even if Shutterstock only lives up to our expectations, our overall universe is now tracking at least 5% growth this quarter, well above what is a 3% decline for the S&P 500. That's counting big hits like The Carlyle Group (CG: $28, flat) and Universal Display (OLED: $202, up 1%) but we've left Welltower (WELL: $87, down 3%) out of the math because its 750% earnings expansion blows out all the rest of the math. On the other hand, we've left all the disappointments in . . . and BMR stocks still have growth on their side.


It's no wonder our recommendations are up an aggregate 2% since each reported its numbers. This is a winning season for us, especially when you compare it to the way the market punished good and bad reports equally last quarter. The tone set now will guide our stocks through the end of the year. We like it. (And by the way, it's not too early to contemplate how well we've done for 2019 as a whole. Our active positions are up 33% YTD with seven weeks to go. Not bad at all.)




Earnings Preview: JBG Smith (JBGS: $41, flat yesterday)

Earnings Date: Tuesday, 5:00 PM ET (if history is any guide)

Expectations: 3Q19
Revenue: $122 million
Net Loss: $5.6 million
EPS: -($0.01)
Funds From Operations: $0.30

Year Ago Quarter Results
Revenue: $158 million

Net Profit: $23 million
EPS: $0.19
Funds From Operations: $0.36

Implied Revenue Decline: 23%
Implied EPS Decline: flip from profit to loss
Implied FFO Decline: 17%

Target: $48
Sell Price: $36
Date Added: May 16, 2019
BMR Performance: -1%


Key Things To Watch For in the Quarter


JBG Smith tends to be very quiet but in the past management has snuck out the quarterly numbers the Tuesday afternoon following its dividend announcement. If history is any guide, that's today. Our expectations are not high, as renovations at the company's Marriott location will take a bite out of overall revenue. That's all right. We're here for two reasons: The $0.22 dividend, which looks secure as long as Funds From Operations holds up above that level, and Amazon's choice of JBG Smith to host its 500,000 square-foot Washington, DC headquarters. 


It would take a glitch in the Amazon move-in process or a sudden downdraft in FFO to sour us on this company. Otherwise, we're more than willing to accept a few quarters of drag in order to chase the big score to come. Amazon is going to be a game changer here. We're excited.




Earnings Preview: Omega Healthcare Investors (OHI: $43, down 1%)

Earnings Date: Tuesday, 5:00 p.m. ET

Expectations: 3Q19
Revenue: $233 million

Net Profit: $87 million
EPS: $0.40
Funds From Operations: $0.76

Year Ago Quarter Results
Revenue: $222 million

Net Profit: $57 million
EPS: $0.28
Funds From Operations: $0.77

Implied Revenue Growth: 5%
Implied EPS Growth: 42%
Implied FFO Decline: 1%

Target: $45
Sell Price: $28
Date Added: March 22, 2016
BMR Performance: 52%


Key Things To Watch For in the Quarter


After our other Senior Housing REITs earned a mixed reaction, it's up to Omega to tip the balance. Ventas did well but spooked the market with unnecessarily dour guidance. Welltower had zero complaints, so we suspect any glitches are specific to Ventas operators and not any hint of broader industry weakness. Given the way Omega and Welltower reacted to their competitor's numbers, we could see all three stocks surge depending on what we see here.


Of course all of this relies on Omega to announce good things. From the way management has already done the hard work of checking all the operators and taking over underperforming properties, a repeat of Ventas is extremely unlikely. Instead, we're looking for robust profit expansion to continue now that all properties are operating at peak levels. There isn't a lot of pricing power here to feed enhanced revenue, but a more efficient operation still provides plenty of excitement on the bottom line.


And in the meantime, we're overdue a dividend increase, so the more Funds From Operations come in above $0.67 per share, the more likely that higher payout becomes. While we anticipate an infinitesimal decline on FFO, it's practically a rounding error. As long as Omega hits the mark, we have everything we need.


We love this company. On August 5th (my birthday!) the stock was at $36. It's now about $43. For a stock paying 6% we would expect it to be flat. Instead it is up 19% in 3 months!



Earnings Preview: CBRE Group (CBRE: $55, flat)

Earnings Date: Wednesday, 8:00 a.m. ET

Expectations: 3Q19
Revenue: $5.7 billion

Net Profit: $265 million
EPS: $0.79

Year Ago Quarter Results
Revenue: $5.2 billion

Net Profit: $270 million
EPS: $0.79

Implied Revenue Growth: 10%
Implied EPS Growth: flat

Target: $60
Sell Price: $44
Date Added: February 22, 2016
BMR Performance: 113%


Key Things To Watch For in the Quarter


This is another revenue season for our favorite fast-growing Real Estate Services company, so we're happy as long as earnings stay roughly in line with last year's level. The top line is what we care about. As long as CBRE is driving sales up about 10%, profit growth can wait until next quarter. Guidance is critical . . . if earnings are on track to surge beyond $1.35 per share, top-line expansion will feed the bottom line before we know it.