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Federal Realty Investment Trust (FRT - Analyst Report), the retail real estate investment trust (REIT), is back on the growth track with its strong focus on expansion opportunities in premium markets, which generates solid rental income and long-term value creation potential.

Federal Realty bounced back with an earnings surprise in the first quarter, after posting in-line results in the prior quarter, thanks to strong core operating portfolio performance. In particular, the company’s first-quarter 2014 FFO per share of $1.21, surpassed the Zacks Consensus Estimate of $1.19 by 1.7% and the year-ago quarter figure of $1.14 by 6.1%. Higher revenues and improved same-store portfolio performance aided the results.

We believe Federal Realty’s expansion strategy has strong potential and promises steady income escalations in the long run. Moreover, the company’s portfolio of high quality shopping centers along with the diversified tenant base comprising grocery stores and low-end discount retailers – such as Bed Bath & Beyond Inc. (BBBY - Analyst Report) and The TJX Companies, Inc. (TJX - Analyst Report) – position it well for growth.

Although the significant construction pipeline of Federal Realty promises bright prospects, it increases operational risks and tends to drag margins in the near term. Additionally, a rise in online customer purchases continues to be a headwind for the demand of its properties.

To gain deeper insight into Federal Realty, you can refer to our updated research report, which was issued on Jul 7, 2014.

Over the last 30 days, the Zacks Consensus Estimate for 2014 and 2015 FFO per share remained stable at $4.92 and $5.36 per share, respectively. The stock currently has a Zacks Rank #2 (Buy).

Stocks that Warrant a Look

Another better-ranked stock in the retail REIT space is Regency Centers Corporation (REG - Analyst Report), which has the same rank as Federal Realty.

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

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