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Regency Centers (REG) to Post Q1 Earnings: What's in Store?

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Regency Centers Corporation (REG - Free Report) is slated to report first-quarter 2017 results on May 9, after the market closes.

This Jacksonville, FL-based retail real estate investment trust (“REIT”) generated a positive surprise of 2.38% in the prior quarter. Results were backed by better-than-expected growth in revenues.

Over the trailing four quarters, the company beat the Zacks Consensus Estimate in three occasions, with an average beat of 3.12%. This is depicted in the graph below.

Is the company poised for a winning quarter? Or will a challenging backdrop in the retail real estate market hurt its financials this earnings season? Let’s see how things have shaped up for this announcement.

Factors to Consider

Regency primarily focuses on building a premium portfolio of grocery-anchored shopping centers. Such centers are usually necessity driven and drive a dependable traffic. Further, the company has considerable experience in the retail real estate industry, with 225 shopping centers’ development since 2000, denoting an investment at completion of over $3.5 billion.

Moreover, in March this year, Regency announced the closure of the Equity One merger deal, which helped in creating a high-quality portfolio of 429 properties, mainly grocery-anchored. The company also became a member of the S&P 500 Index in March. This merger enhanced the company’s concentration in affluent and in-field trade areas with solid demographics, which is likely to lure reputed retailers to its centers. This is anticipated to drive the company’s rental rates and occupancy levels over the long term.

However, though a number of the company’s tenants offer services or sell groceries, the overall shift to internet sales in the retail market is a plausible concern. This is because the shift in retail shopping from brick and mortar stores to internet sales is adversely affecting the retail tenants’ sales, leading retailers to reconsider their footprint and opt for store closures, thereby resulting in lesser demand for retail real estate space. In fact, amid this environment, same-property net operating income is anticipated to moderate in the near term.

Over the past three months, shares of Regency Centers underperformed the Zacks categorized REIT and Equity Trust – Retail industry. The shares suffered a loss of 11.6%, against 7.8% decline of the industry.

Prior to the first-quarter earnings release, there is lack of any solid catalyst for becoming overtly optimistic about the company’s business activities and prospects. As such, the Zacks Consensus Estimate of FFO per share for the first quarter remained unchanged at 83 cents over the past 30 days.

Earnings Whispers

Our proven model does not conclusively show that Regency Centers 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.

Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate estimate of 82 cents and the Zacks Consensus Estimate of 83 cents, is -1.21%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Regency Centers currently has a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s negative ESP makes our 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 seeing negative estimate revisions.

Stocks to Consider

Investors can also consider better-ranked stocks in the REIT space like Equity LifeStyle Properties, Inc. (ELS - Free Report) , Prologis, Inc. (PLD - Free Report) and PS Business Parks, Inc. . All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Equity LifeStyle Properties currently has a long-term growth rate of 4.7%.

Prologis’ estimates for 2017 funds from operations (“FFO”) per share moved north nearly 3.8% to $2.76, over the past 30 days.

Moreover, PS Business Parks’ estimates for 2017 FFO per share climbed 1.0% to $5.93, over the past seven days.


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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