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Simon Property (SPG) to Report Q1 Earnings: What's in Store?

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Retail real estate investment trust (REIT) Simon Property Group Inc. (SPG - Free Report) is expected to report first-quarter 2017 results on Apr 27, before the market opens.

The company’s shares lost 7% in the last three months. The Zacks Consensus Estimate for first-quarter funds from operations (FFO) is currently pegged at $2.76.

Last quarter, the company delivered a positive surprise of 15.9%. In the trailing four quarters, Simon Property posted an average positive surprise of 5.2%, beating estimates on all the occasions. The graph below depicts this surprise history.

Let’s see how things have shaped up for this announcement.

Factors to Consider

Indianapolis, IN-based Simon Property enjoys a diversified exposure to retail assets across the U.S. Additionally, its international presence aids sustainable long-term growth compared with its domestically focused peers.

However, rising consumer purchases through the Internet emerged as a pressing concern for retail REITs. The declining mall traffic and store closures amid aggressive growth in online sales kept retail REITs on tenterhooks. While the company is striving to counter such pressure through various moves, the implementation of such measures requires a decent upfront cost. Consequently, this would limit any robust growth in its profit margins.

The Zacks Consensus Estimate for FFO per share moved south in the last 30 days.

Earnings Whispers

Our proven model does not conclusively show that Simon Property will beat on earnings this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here as you will see below.  
 
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate currently stand at $2.76, which translates into an Earnings ESP of 0.00%.

Zacks Rank: Simon Property currently has a Zacks Rank #3. Though this increases the predictive power of ESP, the company’s 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that they have the right combination of elements to report a positive surprise this quarter:

EPR Properties (EPR - Free Report) , expected to release earnings on May 2, has an Earnings ESP of +0.84% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Physicians Realty Trust (DOC - Free Report) , expected to release earnings on May 3, has an Earnings ESP of +3.33% and a Zacks Rank #3.

STORE CAPITAL CORPSTORE CAPITAL CORP , expected to release first-quarter results on May 4, has an Earnings ESP of +2.44% and a Zacks Rank #3.

Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share. 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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