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Why Should You Bet on Regency (REG) Stock Right Now?

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Shares of Regency Centers Corporation (REG - Free Report) , a retail real estate investment trust (REIT), have been performing well, of late. In the past month, the stock has gained 2.8%, while the industry incurred a loss of 0.9%.

 

In fact, the rally might continue in the near term as well, as there are a number of favorable factors.

Regency has been focusing on building a premium portfolio of grocery-anchored shopping centers. Such grocery-centered shopping centers are necessity driven, thus drive a dependable traffic. Making solid progress with this strategy, the company successfully merged with Equity One, creating a high-quality portfolio of 429 properties, mainly grocery-anchored, situated in several top markets for Regency.

These efforts have helped Regency to already realize $27 million of general and administration (G&A) cost synergies. In fact, management anticipates realizing another $27 million of G&A synergies in 2018.

Such strategic acquisitions are anticipated to be accretive to core funds from operations (FFO) per share and, in turn, drive long-term growth.

Furthermore, the company announced an acquisition of 22 acres of land for a 170,000-square-foot shopping center project in Raleigh, NC. With an impressive tenant roster, this hub is expected to enjoy high footfall.

Regency has a debt/equity ratio of 0.53, lower than the industry’s average of 1.25. As such, it enjoys high financial flexibility, which supports the company’s growth pursuits.

In addition, Regency reported better-than-expected results in the third quarter with respect to FFO per share. The company witnessed robust growth in revenues and same-property net operating income (NOI), as well as stronger leasing activity in its same-property portfolio and small-shops portfolio. In fact, Regency surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 4.6%. 

With current-year projected sales growth rate of 58.9%, we anticipate robust bottom-line performance as sales growth is usually an indicator of a company's future earnings performance.

Further, the company generates cash flow per share of $3.19 as compared to the industry’s average of $2.04. This, along with its impressive sales growth projection, makes us optimistic about Regency’s long-term growth.

This Zacks Rank #2 (Buy) stock has also seen the Zacks Consensus Estimate for current-year FFO per share remaining unchanged at $3.67 in a month’s time. Given its progress on fundamentals, the stock is likely to keep performing well in the quarters ahead.

Stocks to Consider

Some other to-ranked stocks in the REIT space are Cedar Realty Trust , Urstadt Biddle Properties and DCT Industrial Trust . All three stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cedar Realty’s FFO per share estimates for 2017 remained unchanged at 54 cents in a month’s time.

Urstadt Biddle Properties’ 2017 FFO per share estimates have been revised upward to $1.25 over the past 60 days.

DCT Industrial Trust’s current-year FFO per share estimates have been revised upward by a cent to $2.44 in a week’s time.

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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