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$SRC 2018-08-21 : Transcripts- SRC Edited Transcript of SRC earnings conference call

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Q2 2018 Spirit Realty Capital Inc Earnings Call

SCOTTSDALE Aug 22, 2018 (Thomson StreetEvents) — Edited Transcript of Spirit Realty Capital Inc earnings conference call or presentation Wednesday, August 8, 2018 at 1:00:00pm GMT

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EARNING UPDATE $SRC Spirit Realty Capital, Inc. for quarter ending q_Jun18 – Revenue fell, Margins contracted

[s2If !current_user_can(access_s2member_level0)]Please login to read the earning update on SRC [lwa][/s2If][s2If current_user_can(access_s2member_level0)]Spirit Realty Capital, Inc. reported earnings (EPS) of 0.03 per share for the quarter ending q_Jun18. This is vis-vis 0.06 per share for the previous quarter ending q_Mar18, a decline of 50 %. Compared to last year same quarter (q_Jun17),…

I’m not wildly enthusiastic about the prospects for the broader stock market over the remainder of 2015. But I do think that REITs offer a pocket of value. I don’t see bond yields rising much in today’s market. If the Fed is too timid to raise rates, that tells you that there are enough macro risks out there to keep bond yields low. But if and when the Fed finally does get motivated to raise rates, I don’t see that translating to higher long-term bond yields, or at least not for a while. A higher Fed funds rate is disinflationary, which is good for bond prices.

So for the time being, we seem to be in a sweet spot for bonds where, irrespective of what the Fed does, bond yields should stay lower-than-normal for a while. And as long as bond yields stay low, REITs should outperform the broader market.

Source: Nasdaq

But there is one more reason to believe that REITs are due to continue their rally. Several of the names I follow are very heavily shorted right now. Short sellers have been punishing the sector for months in the view that higher interest rates would wreck the sector. But here’s the thing about heavily-shorted stocks. When you short a stock, you are obligated to buy it back. So when you see a heavily-shorted stock, you know that there is a lot of buying that must happen… eventually. And if too many short sellers try to close their positions at the same time, you get a short squeeze that can send the stock price sharply higher. To toss out a few examples from the list above, Realty Income has a short interest currently equal to more than 11 days’ worth of daily volume. VEREIT has a short ratio of 9 days to cover. And Digital Realty has an almost ridiculously high short ratio of 20 days to cover.

Short sellers have had a great six months shorting the REIT sector. It’s been a profitable trade for them. But with REITs showing modest strength right now in the face of broad market weakness, I expect those short sellers to start bailing… and soon.

Even though they generally have a low correlation to the broader market, REITs are still stocks. And if we have another volatile rough patch like August, you can expect them to fall alongside the rest of the market, at least temporarily. But I still expect REITs to massively outperform the broader market for the remainder of 2015, particularly if the shorts get squeezed.