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Is it Wise to Hold Kimco Realty Stock in Your Portfolio Now?
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The latest numbers from the Labor Department indicate a robust job market with increase in non-farm payrolls, fall in unemployment rate and increase in average hourly earnings in November. Moreover, consumer confidence remains high and spending continues to be resilient, which are likely to support a stellar holiday sales season. This optimism is evident from the eMarketer projections as well, which guide a 3.8% year-over-year jump in U.S. holiday retail sales to $1.008 trillion this year, again marking the first ever trillion-dollar holiday season.
Kimco Realty Corp. (KIM - Free Report) is making every effort to unlock the embedded value of its portfolio through development and re-development initiatives. The company’s tenant roster also includes several well-capitalized retailers that have fared relatively well.
The company is on track with its 2020 Vision that envisages the ownership of high-quality assets, concentrated in major metro markets which offer several growth levers. As part of such efforts, in first-quarter 2019, the company expanded its presence in two high-growth markets in Arizona and California, with a $31.2-million sale-leaseback transaction with Albertsons Companies, for three grocery-anchored parcels in the existing Kimco shopping centers. In fact, amid transformation in the retail landscape, Kimco remains well poised to navigate through the retail apocalypse mall traffic blues, with focus on service and experiential tenants, and omni-channel players.
Moreover, the company is aiming to expand its small shops’ portfolio. These shops basically comprise service-based industries, such as restaurants, salons and spas, personal fitness and medical practices. These shops enjoy frequent customer traffic and are Internet resistant. Amid limited new supply and favorable demographics, this diversification is likely to help Kimco limit its operating and leasing risks.
Further, Kimco is engaged in the execution of strategic measures to boost its capital structure, and enhance the company’s growth profile and tax efficiency as well. The company maintains a strong liquidity profile, with more than $2 billion of immediate liquidity. Additionally, weighted average debt maturity profile now stands at 10.8 years. Moreover, the company aims at growing its unencumbered asset pool.
Kimco’s third-quarter 2019 results also reflected increase in portfolio occupancy reaching an all-time high level, healthy leasing spreads on new lease and positive same-property net operating income (NOI) growth. Particularly, the company registered new leasing spreads of 27.2%. This marked the 23rd straight quarter in which spreads on new leases improved in double digits.
Amid these, shares of Kimco have gained 44.5%, so far this year, outperforming the industry’s 15.2% rally. Moreover, the Zacks Consensus Estimate for the current-year funds from operations (FFO) per share has been revised marginally upward to $1.47 over the past month. Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Nonetheless, in connection to its strategic efforts, the company is making significant disposition of its assets. In fact, dispositions for the nine-month period ended Sep 30, 2019 included 20 properties and three land parcels, aggregating 3 million square feet of space, for a combined gross price of $392.8 million and Kimco’s allocable share of total dispositions, net of acquisitions was $200.8 million. For the full year, the company forecasts $200-$300 million in net dispositions, with a blended cap rate of 7.25-7.75%. While such efforts are encouraging for the long term, the dilutive effect on earnings from high disposition activity cannot be averted in the near term.
Furthermore, though healthy consumer confidence and a resilient economy have infused optimism into the retail market, mall traffic continues to suffer amid rapid shift in customers’ shopping preferences and patterns with online purchases growing by leaps and bounds. In fact, with e-commerce gaining market share from brick-and-mortar stores, retailers are compelled to reconsider their footprint and eventually opt for store closures, while others unable to cope with competition have been filing bankruptcies. Such an environment has also led to tenants demanding substantial lease concessions which mall landlords find unjustified. These have cast a pall on retail REITs, including Simon Property Group Inc. (SPG - Free Report) , Macerich Company (MAC - Free Report) , Taubman Centers , Kimco Realty and others.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Is it Wise to Hold Kimco Realty Stock in Your Portfolio Now?
The latest numbers from the Labor Department indicate a robust job market with increase in non-farm payrolls, fall in unemployment rate and increase in average hourly earnings in November. Moreover, consumer confidence remains high and spending continues to be resilient, which are likely to support a stellar holiday sales season. This optimism is evident from the eMarketer projections as well, which guide a 3.8% year-over-year jump in U.S. holiday retail sales to $1.008 trillion this year, again marking the first ever trillion-dollar holiday season.
Kimco Realty Corp. (KIM - Free Report) is making every effort to unlock the embedded value of its portfolio through development and re-development initiatives. The company’s tenant roster also includes several well-capitalized retailers that have fared relatively well.
The company is on track with its 2020 Vision that envisages the ownership of high-quality assets, concentrated in major metro markets which offer several growth levers. As part of such efforts, in first-quarter 2019, the company expanded its presence in two high-growth markets in Arizona and California, with a $31.2-million sale-leaseback transaction with Albertsons Companies, for three grocery-anchored parcels in the existing Kimco shopping centers. In fact, amid transformation in the retail landscape, Kimco remains well poised to navigate through the retail apocalypse mall traffic blues, with focus on service and experiential tenants, and omni-channel players.
Moreover, the company is aiming to expand its small shops’ portfolio. These shops basically comprise service-based industries, such as restaurants, salons and spas, personal fitness and medical practices. These shops enjoy frequent customer traffic and are Internet resistant. Amid limited new supply and favorable demographics, this diversification is likely to help Kimco limit its operating and leasing risks.
Further, Kimco is engaged in the execution of strategic measures to boost its capital structure, and enhance the company’s growth profile and tax efficiency as well. The company maintains a strong liquidity profile, with more than $2 billion of immediate liquidity. Additionally, weighted average debt maturity profile now stands at 10.8 years. Moreover, the company aims at growing its unencumbered asset pool.
Kimco’s third-quarter 2019 results also reflected increase in portfolio occupancy reaching an all-time high level, healthy leasing spreads on new lease and positive same-property net operating income (NOI) growth. Particularly, the company registered new leasing spreads of 27.2%. This marked the 23rd straight quarter in which spreads on new leases improved in double digits.
Amid these, shares of Kimco have gained 44.5%, so far this year, outperforming the industry’s 15.2% rally. Moreover, the Zacks Consensus Estimate for the current-year funds from operations (FFO) per share has been revised marginally upward to $1.47 over the past month. Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Nonetheless, in connection to its strategic efforts, the company is making significant disposition of its assets. In fact, dispositions for the nine-month period ended Sep 30, 2019 included 20 properties and three land parcels, aggregating 3 million square feet of space, for a combined gross price of $392.8 million and Kimco’s allocable share of total dispositions, net of acquisitions was $200.8 million. For the full year, the company forecasts $200-$300 million in net dispositions, with a blended cap rate of 7.25-7.75%. While such efforts are encouraging for the long term, the dilutive effect on earnings from high disposition activity cannot be averted in the near term.
Furthermore, though healthy consumer confidence and a resilient economy have infused optimism into the retail market, mall traffic continues to suffer amid rapid shift in customers’ shopping preferences and patterns with online purchases growing by leaps and bounds. In fact, with e-commerce gaining market share from brick-and-mortar stores, retailers are compelled to reconsider their footprint and eventually opt for store closures, while others unable to cope with competition have been filing bankruptcies. Such an environment has also led to tenants demanding substantial lease concessions which mall landlords find unjustified. These have cast a pall on retail REITs, including Simon Property Group Inc. (SPG - Free Report) , Macerich Company (MAC - Free Report) , Taubman Centers , Kimco Realty and others.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>