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Key Factors to Impact Federal Realty's (FRT) Q4 Earnings
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Federal Realty Investment Trust (FRT - Free Report) is set to report fourth-quarter and full-year 2020 results on Feb 11, after the bell. 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 retail real estate investment trust (REIT) reported a positive surprise of 1.82% in terms of FFO per share. Though the pandemic adversely impacted the company’s performance, things gradually started to turn around with improvement in rent collections and leasing volumes.
Over the last four quarters, it surpassed estimates on one occasion and missed in the other three, the average negative beat being 9.44%. The graph below depicts the surprise history of the company:
Federal Realty Investment Trust Price and EPS Surprise
Let’s see how things have shaped up prior to this announcement.
Key Factors
The retail real estate market had already been battling dwindling traffic issues, store closures and retailer bankruptcies, and the pandemic has only further aggravated its woes. However, per a report from CBRE Group (CBRE - Free Report) , solid holiday spending helped total retail sales in the fourth quarter, which remained above the first-quarter 2020 pre-pandemic level. In fact, the immunization process roll-out and the additional fiscal stimulus have boosted consumer sentiment.
Retail sales grew 3.9% year on year during the December-end quarter to $1.64 trillion. Though non-store retailers have been witnessing decent sales activity, this holiday season saw higher-than-expected physical store shopping, which is encouraging for the retail real estate market.
The total retail availability rate remained sequentially unchanged at 6.6% in the fourth quarter but expanded 40 basis points year on year thanks to the pandemic. Particularly, the power center segment reported the largest increase year on year. Moreover, rates have varied widely in terms of geography, with the sub-urban areas and tier II cities outperforming higher density urban areas.
Net absorption of 7.1 million square feet in the October-December period marked the first quarterly gain since the outbreak of the global health crisis in the January-March quarter of 2020. Except power centers, every property type recorded positive net absorption. Amid significant e-commerce penetration and store closures, power centers have been affected as well. However, total retail completions plummeted nearly 60% year on year during the fourth quarter due to the COVID-associated restrictions.
Federal Realty has also been affected by the choppy retail environment. The secular industry headwinds are expected to have hurt the company’s performance during the to-be-reported quarter as well. The situation has been further aggravated amid the social-distancing requirements and higher e-commerce adoption due to the pandemic, likely eroding its properties’ occupancy levels and rental rates.
Specifically, with the tenant roster having exposure to lifestyle and entertainment-oriented properties, and retailers that are not essential for consumers during the pandemic, rent collection is still likely to have been a concern.
Nevertheless, with more reopening of stores, tenants stand in a better position to generate revenues and make rent payments. Thus, pressure on retail landlords might have reduced to some extent and the rent-collection figures are likely to have improved.
As of Oct 30, 2020, the company noted that while all 104 of its properties were open and operational, roughly 97% of retail tenants based on annualized base rent were open and operational. The company collected about 85% of the third quarter and 85% of October billed recurring rents as of that date.
Moreover, in December, Federal Realty sold three retail properties for aggregate gross proceeds of $170 million. In addition, the company repaid at par its $250 million 2.55% senior unsecured notes due 2021 and redeemed $250 million 3.00% senior unsecured notes due 2022. Consequently, the company has no public bonds maturing until June 2023. Further, it entered 2021 with around $800 million of cash on the balance sheet and a $1-billion credit facility with full availability.
The Zacks Consensus Estimate for quarterly revenues is pegged at $208.9 million, calling for a 12.7% decline from the year-ago period. Also, Federal Realty’s activities during the quarter were inadequate to win analyst confidence. The consensus estimate for the fourth-quarter FFO per share has been revised a cent downward to $1.07 in a week’s time, suggesting a year-over-year plunge of 32.3%.
For the full year, the Zacks Consensus Estimate for FFO per share has been revised a cent downward to $4.46 over the past week. The figure also indicates a 29.5% decline year on year. Revenues are projected to decline 12.1% year on year to $822.8 million.
Here is what our quantitative model predicts:
Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Federal Realty 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.
Federal Realty currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of 0.01%.
Stocks to Consider
Here are a few stocks in the broader real estate sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:
Washington Real Estate Investment Trust , scheduled to report quarterly earnings on Feb 11, has an Earnings ESP of +0.59% and carries a Zacks Rank of 3 at present.
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.
Just Released: Zacks’ 7 Best Stocks for Today
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Image: Bigstock
Key Factors to Impact Federal Realty's (FRT) Q4 Earnings
Federal Realty Investment Trust (FRT - Free Report) is set to report fourth-quarter and full-year 2020 results on Feb 11, after the bell. 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 retail real estate investment trust (REIT) reported a positive surprise of 1.82% in terms of FFO per share. Though the pandemic adversely impacted the company’s performance, things gradually started to turn around with improvement in rent collections and leasing volumes.
Over the last four quarters, it surpassed estimates on one occasion and missed in the other three, the average negative beat being 9.44%. The graph below depicts the surprise history of the company:
Federal Realty Investment Trust Price and EPS Surprise
Federal Realty Investment Trust price-eps-surprise | Federal Realty Investment Trust Quote
Let’s see how things have shaped up prior to this announcement.
Key Factors
The retail real estate market had already been battling dwindling traffic issues, store closures and retailer bankruptcies, and the pandemic has only further aggravated its woes. However, per a report from CBRE Group (CBRE - Free Report) , solid holiday spending helped total retail sales in the fourth quarter, which remained above the first-quarter 2020 pre-pandemic level. In fact, the immunization process roll-out and the additional fiscal stimulus have boosted consumer sentiment.
Retail sales grew 3.9% year on year during the December-end quarter to $1.64 trillion. Though non-store retailers have been witnessing decent sales activity, this holiday season saw higher-than-expected physical store shopping, which is encouraging for the retail real estate market.
The total retail availability rate remained sequentially unchanged at 6.6% in the fourth quarter but expanded 40 basis points year on year thanks to the pandemic. Particularly, the power center segment reported the largest increase year on year. Moreover, rates have varied widely in terms of geography, with the sub-urban areas and tier II cities outperforming higher density urban areas.
Net absorption of 7.1 million square feet in the October-December period marked the first quarterly gain since the outbreak of the global health crisis in the January-March quarter of 2020. Except power centers, every property type recorded positive net absorption. Amid significant e-commerce penetration and store closures, power centers have been affected as well. However, total retail completions plummeted nearly 60% year on year during the fourth quarter due to the COVID-associated restrictions.
Federal Realty has also been affected by the choppy retail environment. The secular industry headwinds are expected to have hurt the company’s performance during the to-be-reported quarter as well. The situation has been further aggravated amid the social-distancing requirements and higher e-commerce adoption due to the pandemic, likely eroding its properties’ occupancy levels and rental rates.
Specifically, with the tenant roster having exposure to lifestyle and entertainment-oriented properties, and retailers that are not essential for consumers during the pandemic, rent collection is still likely to have been a concern.
Nevertheless, with more reopening of stores, tenants stand in a better position to generate revenues and make rent payments. Thus, pressure on retail landlords might have reduced to some extent and the rent-collection figures are likely to have improved.
As of Oct 30, 2020, the company noted that while all 104 of its properties were open and operational, roughly 97% of retail tenants based on annualized base rent were open and operational. The company collected about 85% of the third quarter and 85% of October billed recurring rents as of that date.
Moreover, in December, Federal Realty sold three retail properties for aggregate gross proceeds of $170 million. In addition, the company repaid at par its $250 million 2.55% senior unsecured notes due 2021 and redeemed $250 million 3.00% senior unsecured notes due 2022. Consequently, the company has no public bonds maturing until June 2023. Further, it entered 2021 with around $800 million of cash on the balance sheet and a $1-billion credit facility with full availability.
The Zacks Consensus Estimate for quarterly revenues is pegged at $208.9 million, calling for a 12.7% decline from the year-ago period. Also, Federal Realty’s activities during the quarter were inadequate to win analyst confidence. The consensus estimate for the fourth-quarter FFO per share has been revised a cent downward to $1.07 in a week’s time, suggesting a year-over-year plunge of 32.3%.
For the full year, the Zacks Consensus Estimate for FFO per share has been revised a cent downward to $4.46 over the past week. The figure also indicates a 29.5% decline year on year. Revenues are projected to decline 12.1% year on year to $822.8 million.
Here is what our quantitative model predicts:
Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Federal Realty 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.
Federal Realty currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of 0.01%.
Stocks to Consider
Here are a few stocks in the broader real estate sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:
Hudson Pacific Properties, Inc. (HPP - Free Report) , slated to release quarterly earnings on Feb 17, currently has an Earnings ESP of +0.76% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Washington Real Estate Investment Trust , scheduled to report quarterly earnings on Feb 11, has an Earnings ESP of +0.59% and carries a Zacks Rank of 3 at present.
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.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.9% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>