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On Aug 16, we reiterated our long-term Neutral recommendation on Kimco Realty Corporation (KIM - Analyst Report). This retail real estate investment trust (REIT) posted strong second-quarter 2013 results and raised its outlook for the year. Yet, rising expenses and competitive pressure remain overhangs.

However, any short-term weakness in the price can be viewed as a good buying opportunity, given Kimco’s growth prospects in the retail sector.

Why the Reiteration?

Aided by notable increases in both revenues and overall occupancy, Kimco’s second-quarter 2013 quarterly adjusted 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.

Therefore, prompted by strong operating fundamentals, the company raised the lower end of its previously issued 2013 adjusted FFO per share guidance for the second time in the year. This upward revision of the guidance enhanced investors' confidence.

However, stiff competition from other players in the market, short-term headwinds for occupancy amid an unsettled economic environment and rise in Internet sales that adversely impact the demand for retail space remain our concerns. Hence, we have reaffirmed our Neutral recommendation on the stock.

Over the last 30 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. Hence, Kimco carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Retail REITs that are performing better and are worth a look include Acadia Realty Trust (AKR - Snapshot Report), Cedar Realty Trust, Inc. (CDR - Snapshot Report) and Realty Income Corp. (O - Snapshot Report). All of them have a Zacks Rank #2 (Buy).

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

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