Lineage faces first earnings hurdle after biggest US IPO – BNN Bloomberg

(Bloomberg) — Lineage Inc.’s first quarterly report. after raising $5.1 billion in the biggest US initial public offering of the year will be a crucial test as the temperature-controlled storage firm faces potentially weak demand for food supplies.

The bar is low for the $16 billion real estate investment trust, which has fallen 7 percent since its July IPO. Wall Street expects the company to report revenue of $1.3 billion and an adjusted diluted loss per share of $1.73 for the quarter that ended in September. Between a challenged U.S. consumer and lower volumes from food producers, cold storage companies are battling several headwinds, according to RBC Capital Markets analyst Michael Carroll.

“Consumers are buying less food, but that’s nothing new,” Carroll said. “Volumes may indicate a slightly better outlook, but those food producers are still working through this uncertain environment.”

Changing data trends didn’t help either. Recent statistics from the US Department of Agriculture on food supplies held in cold storage have dawned. The year’s numbers started out weak, but have turned into a slight uptick in the last four to five months, Carroll said.

Shares of industrial REITs and warehouse owners have weakened in recent months as companies navigate this surge in demand. Since Lineage’s IPO until Monday’s close, shares of its peer Americold Realty Trust Inc. fell 11%, while an index of industrial REITs fell 7%.

Given Lineage’s recent transition from private to public, analyst Piper Sandler Cos. Alexander Goldfarb said the focus is less on traditional metrics like funds from operations and more on the company’s growth story. Nearly 70% of Wall Street is bullish on the stock, with 11 analysts calling it a buy, five a hold and none a sell.

“When a company goes through the process of going private to public, there’s inevitably going to be some noise in the numbers,” Goldfarb said in an interview. “It’s hard to imagine a company coming out of the gate blowing up numbers given that management has been very focused on getting through the IPO process.”

When Lineage reported some second-quarter financials at its stock launch four months ago, the numbers were below expectations, in part because of capital spending, Carroll said. Investors want to see some improvement in core values and stabilization of fundamentals such as occupancy and leverage, he said.

Ultimately, the company’s long-term growth story remains paramount. Lineage has a long history of peer-to-peer acquisitions, including companies such as Turvo, FrigoCare, VersaCold and Emergent Cold. While Wall Street doesn’t expect explicit acquisition commitments on Wednesday’s earnings call, analysts will be looking for more color on the broader deal market and what management sees as the way forward.

“Given management’s focus on the IPO, we would not be surprised to see a slowdown in acquisitions in the near term,” Goldfarb wrote in a note to clients on Sunday. “While the pipeline may not show any slowdown, we wouldn’t view that possibility as a negative or a detractor from the story.”