Marijuana Company Innovative Industrial Properties' Earnings Preview: What to Watch

With its stock up 72% in 2019, this cannabis industry-focused REIT has a lot to prove when it reports Q4 results.

Beth McKenna
Beth McKenna
Feb 27, 2019 at 8:16AM
Financials

Innovative Industrial Properties (NYSE:IIPR), a cannabis industry-focused real estate investment trust (REIT), is slated to report its fourth-quarter and full-year 2018 results after the market closes on Wednesday, March 13. 

Shares of Innovative Industrial Properties (IIP) have returned a whopping 72% in 2019 through Feb. 26, so the San Diego-based company has a lot to prove when it reports. For context, so far this year, the S&P 500 has returned 11.8%, while shares of Canopy Growth, Aurora Cannabis, and Tilray -- the three largest Canadian marijuana growers by market cap -- are up 72.3%, 56.3%, and 11.1%, respectively.

Here's what to watch and expect in IIP's report. 

Marijuana plants in a greenhouse with building frame and fans shown.

Image source: Getty Images.

Innovative Industrial Properties' key quarterly numbers

Here are IIP's year-ago quarter's results and Wall Street's estimates to use as benchmarks.

Metric

Q4 2017 Result

Wall Street's Q4 2018 Consensus

Wall Street's Projected Change (YOY)

Revenue

$2.28 million

$4.76 million

109%

Earnings per share (EPS)

$0.07

$0.26 271%

Adjusted funds from operations (AFFO)

$0.23 -- --

Data sources: Innovative Industrial Properties and Yahoo! Finance. YOY = year over year. *Adjusted funds from operations (AFFO) is a closely watched metric for companies organized as REITs, as it's a main driver of dividend increases. 

While long-term investors shouldn't place too much importance on the Street's near-term estimates, they're helpful to know because they often help make sense out of market reactions.

Wall Street expects strong year-over-year growth, which is reasonable when one considers IIP's acquisition activity. At the end of the year-ago quarter, the company had five properties in four U.S. states where medical marijuana is legal, totaling about 617,000 rentable square feet. At the end of the fourth quarter of 2018, it owned 11 properties in nine states, totaling about 1,027,000 rentable square feet (including about 114,000 square feet under development). We know this from the third quarter's earnings release (10 properties owned at the end of that quarter) plus the press release in mid-December announcing the acquisition of another property.

For additional context, last quarter, Innovative Industrial Properties' revenue soared 152% year over year to $3.93 million, driven by the company's acquisition of new properties and the annual increase of base rent for two of its leases. EPS surged 133% to $0.21, and AFFO per share jumped 81% to $0.38. At the end of the third quarter, IIP owned 10 properties, as previously noted. All were fully leased. 

Check out the latest Innovative Industrial Properties earnings call transcript.

Semiannual earnings call 

Innovative Industrial Properties is scheduled to hold a conference call with analysts the day after earnings are released -- on Thursday, March 14, at 1 p.m. EST. (Yes, you read that unusual time correctly.) 

These calls currently only take place semiannually, which isn't unusual for smaller companies relatively new to the public markets, so investors should expect management to provide quite a bit of color on 2018 results and perhaps some information on the company's progress to date in 2019.