IIPR Posts Impressive Q4 Earnings, Looks Strong in 2020

On Wednesday, Innovative Industrial Properties (NYSE:IIPR), a real estate company that focuses on legal cannabis in the US, reported its fourth-quarter earnings. The fourth quarter ended on December 31. For the quarter, the company reported revenues of $17.7 million, which beat analysts’ expectations of $14.4 million. Also, IIPR’s fourth-quarter diluted EPS was $0.78, which beat analysts’ expectations of $0.57. The better-than-expected fourth-quarter performance could drive the company’s stock price.

IIPR’s revenue growth

Compared to revenues of $4.8 million in the fourth quarter of 2018, IIPR’s revenue grew by 269.5% in the fourth quarter of 2019. Meanwhile, the company’s revenue rose 52.9% from $11.56 million in the third quarter of 2019. The acquisition and leasing of new properties and improved rental contracts for specific properties drove the company’s revenue. In the fourth quarter, IIPR bought ten properties located in five states across the US for $151,772. Notably, the purchasing price excludes transaction costs. Together, the ten properties offer 836,000 square feet of rental space. Subsequent to the quarter, the company acquired nine more properties. As of Wednesday, IIPR owns 51 properties spread across 15 states with a total rental space of 3.2 million square feet. The company’s management stated that it leased 98.9% of the properties with a weighted-average lease time of 15.6 years remaining.

IIPR has invested approximately $563.2 million in acquiring these 51 properties, which excludes transaction expenses. The company has also committed additional capital of $117.5 million to reimburse tenants for developing specific properties. IIPR’s average yield from these 51 properties is 13.3%.

EPS rose in Q4

For the fourth quarter, IIPR reported a diluted EPS of $0.78, which represents 225% growth from $0.24 in the fourth quarter of 2018. Meanwhile, the company’s diluted EPS grew by 41.8% from the previous quarter. IIPR’s sequentially EPS growth was driven by higher revenue. However, the lower net margin and a higher number of shares outstanding offset some of the declines. For the fourth quarter, the company’s net margin was 56.0% lower than 58.2% in the third quarter.

In September 2019, IIPR agreed on an equity distribution deal with three sales agents to sell $250 million worth of its common shares. As of Wednesday, the company has sold $184.8 million worth of common shares under this program.

Stock performance

After delivering strong returns of 67.2% last year, IIPR’s stock price has continued its upward momentum this year. As of Wednesday, IIPR stock has increased by 27.2% this year. Since the company reported an impressive fourth-quarter performance, we expect the stock to rise more. Meanwhile, the company has outperformed its peers this year. Cresco Labs (OTCMKTS:CRLBF), Curaleaf Holdings, and MedMen Enterprises (OTCMKTS:MMNFF) have fallen by 30.6%, 19.8%, and 42.1% year-to-date, respectively. On Wednesday, MedMen also reported its earnings results for the second quarter of fiscal 2020.