KKR Real Estate Surges 5.7%: Is This an Indication of Further Gains?

KKR Real Estate Finance KREF shares soared 5.7% in the last trading session to close at $12.24. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 8.4% gain over the past four weeks.

Shares of KREF witnessed a strong price increase as long-term bond yields have declined with the Fed's announcement of an interest rate cut starting this month. This resulted in a decline in mortgage rates. Housing affordability challenges are expected to decline with a fall in mortgage rates.

Also, rate cuts will likely increase net interest spreads. This will ease earnings pressure for real estate companies, which are currently reeling under high funding costs. Hence, the investors turned bullish on real estate sector stocks, driving KREF higher.

This real estate finance company is expected to post quarterly earnings of $0.31 per share in its upcoming report, which represents a year-over-year change of -34%. Revenues are expected to be $39.52 million, down 11.4% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For KKR Real Estate, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on KREF going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #1 (Strong Buy).

KKR Real Estate is part of the Zacks REIT and Equity Trust industry. Ladder Capital LADR, another stock in the same industry, closed the last trading session 0.3% lower at $12. LADR has returned 4% in the past month.

For Ladder Capital, the consensus EPS estimate for the upcoming report has remained unchanged over the past month at $0.26. This represents a change of -16.1% from what the company reported a year ago. Ladder Capital currently has a Zacks Rank of #3 (Hold).

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