Tanger Factory Outlet Centers, Inc. (SKT - Snapshot Report) delivered better than expected results for the third quarter, driven by higher rental and occupancy rates.
Analysts revised their estimates higher for both 2011 and 2012 off the strong quarter, sending the stock to a Zacks #2 Rank (Buy).
The company has also been steadily raising its dividend. It currently yields 2.7%.
Bargain Shopping Remains Strong
Tanger Factory Outlet Centers, Inc. is a retail real estate investment trust (REIT) that owns, develops, and manages 38 factory outlet centers in 25 states.
Outlet stores continue to be one of the most profitable divisions for many retailers. And many analysts expect consumers to continue shopping at outlet centers even as the economy improves.
This is because consumers can find the same name-brand merchandise at outlet centers as they would at full-priced stores in the mall, so they don't really feel like they're "trading down" by shopping there, only like they're getting a bargain.
Tanger is headquartered in Greensboro, North Carolina and has a market cap of $2.6 billion.
Third Quarter Results
Tanger reported better than expected results for the third quarter of 2011. Funds from operation (FFO) per share came in at 39 cents, beating the Zacks Consensus Estimate by 3 cents. It was a stellar 15% increase over the same quarter in 2010.
Total revenue rose 20% to $83.2 million. Same-store net operating income was up a solid 5.0% due to substantial rental rate increases. The occupancy rate also increased, from 98.1% to 98.3% in the quarter.
Analysts revised their estimates higher for both 2011 and 2012 off the solid quarter, sending the stock to a Zacks #2 Rank (Buy).
The Zacks Consensus Estimate for 2011 is currently $1.44, at the high end of management's guidance of $1.41 and $1.44. This represents 8% growth over 2010 FFO per share.
The 2012 consensus estimate is currently $1.62, corresponding with 12% growth.
Tanger is expected to grow through a mix of acquisitions and organic growth as it looks to expand in the United States and Canada.
In addition to strong earnings growth, Tanger pays a dividend that yields a solid 2.7%. As you can see, the company has steadily increased its dividend over the last decade:
The valuation picture looks reasonable for Tanger. Shares trade at 20x 12-month forward FFO, a slight premium to the industry average of 17x. But this premium is justified given Tanger's above-average growth projections.
Its price to sales ratio of 8.4 is slightly below its peers at 8.8.
The Bottom Line
With rising earnings estimates, strong growth prospects, a solid 2.7% dividend yield and reasonable valuation, Tanger offers plenty to like.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.