IIPR Stock Rises after Revenue and EPS Beat


Nov. 7 2019, Published 7:32 a.m. ET

Yesterday, Innovative Industrial Properties (IIPR) reported its third-quarter earnings results after markets closed. The company beat analysts’ revenue and EPS estimates. Its revenue of $11.56 million surpassed analysts’ estimate of $10.7 million, and its EPS of $0.55 were well above analysts’ $0.48 forecast. IIPR’s strong performance boosted its stock by 6.8% after hours yesterday.

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IIPR’s revenue growth

In the third quarter, IIPR’s revenue grew 194.3% YoY (year-over-year) from $3.93 million, and 34.1% sequentially from $8.62 million. The company generated $11.2 million in rental revenue and $0.36 million from tenant reimbursements.

IIPR’s new property acquisitions and leasing agreements drove its revenue. During the third quarter, the company acquired approximately 508,000 square feet of industrial property for $130.2 million. The company also amended its agreement for four properties in Illinois, Massachusetts, and Minnesota. After the third quarter, IIPR acquired 484,000 square feet of industrial property for $158.8 million. The company also acquired and leased four dispensaries in Michigan by investing $9.0 million.

As of yesterday, the company owned 41 properties across 13 states, covering about 2.8 million square feet of rental space. The company has leased all of its properties, which have a weighted-average remaining lease period of 15.5 years. Overall, IIPR has invested $410.2 million. It has also committed to reimburse an additional $138.9 million to tenants after they develop the properties. The company’s average yield from the capital employed on these 41 properties stands at 13.8%, excluding transaction expenses and reimbursement costs of $138.9 million. In the second quarter, the company’s average yield was 14.6% from 26 properties.

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IIPR’s EPS rises

In the third quarter, IIPR’s EPS of $0.55 rose 161.9% YoY from $0.21 and 83.3% sequentially from $0.30. The company’s higher operating income drove its EPS.

Issue of additional stocks

In July, IIPR issued 1,495,000 common shares, offering underwriters the option to purchase an additional 195,000 shares. With the transaction, the company netted around $180.1 million. In September, the company signed an equity distribution agreement with three agents to offer $250 million in shares through an “at-the-market” offering program. Through this program, the company has sold $46.9 million in shares over the last two months. IIPR plans to use the financing proceeds to acquire specialized industrial real estate assets.

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Stock performance

IIPR has been a silver lining in the cannabis space, which has been going through a rough period. The company’s impressive second-quarter earnings beat analysts’ estimates in August. As of yesterday, IIPR stock had returned 59.9% year-to-date, while the ETFMG Alternative Harvest ETF (MJ) had fallen 22.8%.

In comparison, peers Aphria (APHA), Aurora Cannabis (ACB), and Charlotte’s Web Holdings (CWEB) (CWBHF) have fallen 16.7%, 27.4%, and 7.3%, respectively, this year.

Last month, Aphria reported strong fiscal 2020 first-quarter earnings. However, weakness in the cannabis sector appears to have dragged the stock down. To learn more, read Does Aphria’s Valuation Look Attractive in November?

Aurora’s lower-than-expected fourth-quarter revenue and analyst downgrades have dragged down its stock. Meanwhile, Charlotte’s stock fell due to its weak second-quarter performance, with the company’s revenue and EPS missing analysts’ expectations. Both Aurora and Charlotte’s Web are set to report their earnings next week. To learn about analysts’ expectations, read Can ACB’s and CWEB’s Earnings Help Cannabis? And for cannabis investment news, follow 420 Investor Daily.


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