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What's in the Offing for Kimco (KIM) This Earnings Season?
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Kimco Realty Corporation (KIM - Free Report) is slated to report third-quarter 2020 earnings on Nov 5, before the market opens. The company’s quarterly results might display year-over-year declines in revenues and funds from operations (FFO) per share.
In the last reported quarter, this Jericho, NY-based retail real estate investment trust (REIT) delivered a surprise of 4.35% in terms of FFO per share. Results reflected 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.
Kimco beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3.17%. This is depicted in the graph below:
Let’s see how things have shaped up for this announcement.
Factors at Play
The retail real estate market had already been battling dwindling traffic issues, store closures and retailer bankruptcies, and now the pandemic is only adding to its woes. Despite retail sales rebounding to the pre-COVID levels during the July-September period, with improvement in consumer sentiment, per a report from CBRE Group (CBRE - Free Report) , the total retail availability rate expanded 20 basis points (bps) to 6.6% in the quarter, signaling the weakening retail real estate fundamentals.
Particularly, experience-based retail, including full-service restaurants, fitness centers and movie theaters have been affected the most. Negative net absorption aggregated nearly 15 million square feet. This was mainly in the neighborhood, community & strip center segment, and represented the largest decline since the first quarter of 2009. Also, construction completions of less than 6 million square feet marked the lowest quarterly total ever recorded.
Kimco, too, is not immune to store closures and retailer bankruptcies. The choppy retail real estate environment is likely to have curbed its growth momentum in the to-be-reported quarter, as secular industry headwinds continue dampening industry fundamentals. Further, rent relief and deferral requests from its tenants might have hurt revenue growth.
However, Kimco enjoys ownership of high-quality assets, concentrated in the top major metro markets, which offer several growth levers. Apart from these, having a grocery component has been saving the grace of retail REITs amid these uncertain times, and for Kimco, a significant chunk of its annual base rent comes from grocery-anchored centers.
The company also rolled out the curbside pick-up program during the June-end quarter to adhere to social-distancing norms, and facilitate its tenants and shoppers. This move is likely to have aided its performance during the third quarter.
In September, Kimco announced a third-quarter dividend of 10 cents per share, which it reinstated after a temporary suspension in May. The company also noted that it is witnessing improvement in footfall at its centers with the reopening of additional tenants, resulting in better rent collection and a lesser need for rent deferral agreements.
The company’s rent receipts improved with 85% collection of August base rents, following the 82% of July rents and 76% of June rents. Also, rent deferrals granted by the company are approximately only 2% of the base rent for August.
The Zacks Consensus Estimate for Kimco’s quarterly revenues is currently pinned at $262.1 million, calling for a 7.4% decline from the prior-year quarter.
In addition to the above, Kimco’s activities during the July-September quarter were inadequate to gain analyst confidence. The Zacks Consensus Estimate of 27 cents for quarterly FFO per share indicates a downward revision of 3.6% over the past month. The figure also calls for a decline of 27%, year over year.
Here is what our quantitative model predicts:
Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Kimco this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Kimco currently carries a Zacks Rank #3 and has an Earnings ESP of -1.60%.
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 these too have the right combination of elements to report a positive surprise this quarter:
National Storage Affiliates Trust (NSA - Free Report) , slated to release third-quarter earnings on Nov 5, has an Earnings ESP of +1.94% and carries a Zacks Rank of 2 at present.
Ventas, Inc. (VTR - Free Report) , scheduled to announce earnings results on Nov 6, has an Earnings ESP of +2.03% and carries a Zacks Rank of 3, currently.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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What's in the Offing for Kimco (KIM) This Earnings Season?
Kimco Realty Corporation (KIM - Free Report) is slated to report third-quarter 2020 earnings on Nov 5, before the market opens. The company’s quarterly results might display year-over-year declines in revenues and funds from operations (FFO) per share.
In the last reported quarter, this Jericho, NY-based retail real estate investment trust (REIT) delivered a surprise of 4.35% in terms of FFO per share. Results reflected 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.
Kimco beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3.17%. This is depicted in the graph below:
Kimco Realty Corporation Price and EPS Surprise
Kimco Realty Corporation price-eps-surprise | Kimco Realty Corporation Quote
Let’s see how things have shaped up for this announcement.
Factors at Play
The retail real estate market had already been battling dwindling traffic issues, store closures and retailer bankruptcies, and now the pandemic is only adding to its woes. Despite retail sales rebounding to the pre-COVID levels during the July-September period, with improvement in consumer sentiment, per a report from CBRE Group (CBRE - Free Report) , the total retail availability rate expanded 20 basis points (bps) to 6.6% in the quarter, signaling the weakening retail real estate fundamentals.
Particularly, experience-based retail, including full-service restaurants, fitness centers and movie theaters have been affected the most. Negative net absorption aggregated nearly 15 million square feet. This was mainly in the neighborhood, community & strip center segment, and represented the largest decline since the first quarter of 2009. Also, construction completions of less than 6 million square feet marked the lowest quarterly total ever recorded.
Kimco, too, is not immune to store closures and retailer bankruptcies. The choppy retail real estate environment is likely to have curbed its growth momentum in the to-be-reported quarter, as secular industry headwinds continue dampening industry fundamentals. Further, rent relief and deferral requests from its tenants might have hurt revenue growth.
However, Kimco enjoys ownership of high-quality assets, concentrated in the top major metro markets, which offer several growth levers. Apart from these, having a grocery component has been saving the grace of retail REITs amid these uncertain times, and for Kimco, a significant chunk of its annual base rent comes from grocery-anchored centers.
The company also rolled out the curbside pick-up program during the June-end quarter to adhere to social-distancing norms, and facilitate its tenants and shoppers. This move is likely to have aided its performance during the third quarter.
In September, Kimco announced a third-quarter dividend of 10 cents per share, which it reinstated after a temporary suspension in May. The company also noted that it is witnessing improvement in footfall at its centers with the reopening of additional tenants, resulting in better rent collection and a lesser need for rent deferral agreements.
The company’s rent receipts improved with 85% collection of August base rents, following the 82% of July rents and 76% of June rents. Also, rent deferrals granted by the company are approximately only 2% of the base rent for August.
The Zacks Consensus Estimate for Kimco’s quarterly revenues is currently pinned at $262.1 million, calling for a 7.4% decline from the prior-year quarter.
In addition to the above, Kimco’s activities during the July-September quarter were inadequate to gain analyst confidence. The Zacks Consensus Estimate of 27 cents for quarterly FFO per share indicates a downward revision of 3.6% over the past month. The figure also calls for a decline of 27%, year over year.
Here is what our quantitative model predicts:
Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Kimco this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Kimco currently carries a Zacks Rank #3 and has an Earnings ESP of -1.60%.
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 these too have the right combination of elements to report a positive surprise this quarter:
Lexington Realty Trust (LXP - Free Report) , set to report quarterly numbers on Nov 5, currently has an Earnings ESP of +1.33% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
National Storage Affiliates Trust (NSA - Free Report) , slated to release third-quarter earnings on Nov 5, has an Earnings ESP of +1.94% and carries a Zacks Rank of 2 at present.
Ventas, Inc. (VTR - Free Report) , scheduled to announce earnings results on Nov 6, has an Earnings ESP of +2.03% and carries a Zacks Rank of 3, currently.
Note: Anything related to earnings presented in this write-up represent 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 >>