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Kimco Realty (KIM) Up 10.7% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Kimco Realty (KIM - Free Report) . Shares have added about 10.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Kimco Realty due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Kimco Realty Beats on Q2 FFO, Collects 82% of July Rent

Kimco’s second-quarter 2020 FFO came in at 24 cents per share, marginally surpassing the Zacks Consensus Estimate of 23 cents.

Results reflect healthy rental rate leasing spreads on new lease and renewals. However, same-property NOI was affected mainly due to a charge for potentially uncollectible accounts receivable.

The FFO per share, however, came in lower than the year-ago quarter’s number of 36 cents.

The retail REIT generated revenues of $238.9 million, which slipped 16.1% year over year and also missed the Zacks Consensus Estimate of $250 million.

Notably, at the end of July, all of the company’s shopping centers were open and operational with around 94% of tenants, based on the annualized base rent currently open, including some that are operating on a limited basis. Moreover, the company collected roughly 70% of the total pro-rata base rents billed for second-quarter 2020 and 82% for July. It also granted rent deferrals approximating 18% of pro-rata minimum base rent for the reported quarter.

Quarter in Detail

Pro-rata portfolio occupancy at the end of the second quarter was 95.6%. The company attained pro-rata anchor occupancy of 98.2%, flat year on year but shrunk 40 basis points (bps) mainly because of the vacates of four 24 Hour Fitness locations, one Lucky’s Market,two Pier 1 leases and the closing of three A.C. Moore stores during the June-end quarter.Yet, small-shop occupancy at the end of the reported quarter was 88%. This marks a sequential contraction of 80 bps and a year-over-year decline of 250 bps.

The company signed 52 new leases and executed 180 lease renewals & options during the April-June quarter. Pro-rata rental-rate leasing spreads on comparable spaces increased 12%, with rental rates for new leases and renewals/options climbing 22.9% and 10.7%, respectively.

Same-property NOI declined 13.6% year over year, primarily reflecting a charge for potentially uncollectible accounts receivable.

During the second quarter, the company recognized a $51.7-million charge for potentially uncollectible accounts receivable due to the pandemic’s adverse economic impact.

Balance Sheet Position

Kimco exited second-quarter 2020 with cash and cash equivalents of $201.7 million, up from the $123.9 million recorded at the end of 2019. Moreover, the retail REIT had more than $2.2 billion of immediate liquidity at quarter end. This included full availability under its $2-billion unsecured revolving credit facility and consolidated weighted-average debt maturity profile of 10.6 years. Also, it had approximately 320 unencumbered properties. Further, it maintains $628.2 million of Albertsons Companies Inc. common stock, subject to certain lock-up provisions.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

Currently, Kimco Realty has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Kimco Realty has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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