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Analyst Blog

On Aug 13, 2013, Zacks Investment Research upgraded Kimco Realty Corporation (KIM - Analyst Report) to a Zacks Rank #2 (Buy). The upgrade at this retail real estate investment trust (REIT) came on the back of Kimco’s solid second-quarter 2013 results and its strong operating fundamentals.

Why the Upgrade?

Aided by notable rise in revenues and overall occupancy, Kimco’s second-quarter 2013 quarterly funds from operations (FFO) per share rose 12.9% year over year and beat the Zacks Consensus Estimate by 6.06%. Moreover, Kimco witnessed positive same-property NOI increase for the 13th consecutive quarter. Consequently, the company raised the lower end of its previously issued 2013 adjusted FFO per share guidance for the second time in the year. This encouraging move drove investors’ confidence on the stock.

Additionally, Kimco is currently focusing on owning and operating strategic retail assets through investments in North America. As part of this effort, the company is shedding its non-strategic retail and non-retail assets. This portfolio restructuring activity, along with easy access to capital is expected to add to the Kimco’s profitability going forward.

As a result of these bullish factors, the tendency for an upward estimate revision has been obvious in recent times. Over the last 7 days, the Zacks Consensus Estimate for 2013 FFO per share rose 0.8% to $1.33. The current estimate is equal to the higher end of the adjusted FFO estimate range ($1.31–$1.33 per share) provided by Kimco. On the other hand, for 2014, the Zacks Consensus Estimate for FFO per share remained unchanged at $1.38.

Additionally, the long-term earnings growth forecast for Kimco is 4.86%. Hence, the favorable estimate revisions, driven by positive second-quarter results and expansion efforts made way for the upgrade in the rank.

Other Stocks to Consider               

Apart from Kimco, other stocks worth considering in the retail REIT industry include Acadia Realty Trust (AKR - Snapshot Report), Cedar Realty Trust, Inc. (CDR - Snapshot Report) and Realty Income Corp. (O - Snapshot Report). All of them carry a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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