EPR Properties heads into its third-quarter report with a striking disconnect. Last quarter management raised full-year guidance for the second straight time, posted its biggest investment quarter since the pandemic and signed Netflix as an A-rated tenant. Since then the stock has dropped 15.8%, trailing the S&P 500 by 20 percentage points. The October 28 release, due after the close, needs to show that the business momentum described in July is turning into steady per-share growth.
The Street expects funds from operations of $1.43 a share, up 2.9% from $1.39 a year ago and only a penny above the second quarter's $1.42. That is a modest pace next to the 12.7% gain management delivered last quarter. Revenue is expected at $172.1 million, down 5.6% from a year earlier and well below the $196.1 million reported in the second quarter. Part of that gap probably reflects percentage rent. Management said the strong second-quarter figure owed a lot to the timing of the Regal lease across June and July, so some give-back is reasonable. Still, a revenue decline is hard to square with the $440.8 million deployed at roughly 8.5% yields in the second quarter. Investors should check whether those acquisitions, including the seven Six Flags parks and Netflix House in King of Prussia, are adding rent as quickly as the yield math implies.
Guidance sets the frame. Management now expects 2026 FFO of $5.41 to $5.57 a share, up from $5.37 to $5.53 and from an original $5.28 to $5.48. Consensus of $5.50 sits just above the midpoint, so the Street is comfortably inside the range rather than leaning toward the top. With $2.68 earned in the first half, the midpoint implies about $2.81 for the second half. A $1.43 third quarter fits that path. A clear beat would make a third raise plausible. Two increases have already lifted the bar, though, so simply reaffirming the range could disappoint a market that has grown used to upward revisions.
The operating checks are fairly specific. Investment guidance has climbed from $400 to $500 million to $600 to $700 million, and the second-quarter surge left about $100 million to $200 million to deploy over the rest of the year. Steady deal flow at similar yields would support management's claim that EPR has moved from positioning for growth to executing it. Credit quality is the next test. Bad debt was running near 40 basis points, below the 50 to 75 basis point budget, and box office was up about 10% year to date. Holding those trends would ease concerns about the theater-heavy portfolio, now about one-third of assets. Topgolf's turnaround under new ownership and early guest reviews at Six Flags deserve updates. The weak spots appear contained. Northern California ski, education labor costs and the delayed Genting Catskills transaction are all minor, and management has described Genting as upside rather than a dependency.
The market seems unconvinced anyway. Sentiment has improved to 20.7% bullish from 8.7% before the last report, but the shares have not followed. At $54.28, the stock trades below its 200-day moving average of $57.16 and only about 1% above its post-earnings low of $53.69, after topping out at $64.50. Expectations embedded in the price look subdued. That gives the company room to impress, but it also suggests investors have doubts about something the guidance does not capture.
The central question is whether the record investment pace shows up in recurring rent. If FFO lands at or above $1.43, the revenue softness can be traced to percentage rent timing and the outlook holds or rises, the growth story stays intact. A weak top line without a clear explanation would raise doubts about how quickly the new properties will contribute.