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Why Is Realty Income Corp. (O) Up 0.9% Since Last Earnings Report?
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It has been about a month since the last earnings report for Realty Income Corp. (O - Free Report) . Shares have added about 0.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Realty Income Corp. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Realty Income Beats on Q4 FFO, Sees Solid Acquisition in 2021
Realty Income’s fourth-quarter 2020 adjusted AFFO per share of 84 cents surpassed the Zacks Consensus Estimate of 83 cents. However, the reported figure is down 2.3% from the prior-year quarter’s 86 cents. The better-than-expected performance reflects improved revenues in the quarter.
Total revenues for the reported quarter came in at $418.1 million, exceeding the Zacks Consensus Estimate of $417.5 million. The top-line figure also improved 5.2% year on year.
For 2020, the company reported adjusted FFO per share of $3.39, up from the prior year’s $3.32. Total revenues of $1.65 billion increased 10.7% year on year.
Realty Income also apprised of its rental receipts through Jan 31, 2021, and noted that it has collected 93.6% of contractual rent due for the fourth quarter. Further, the company has collected 89.9% of contractual rent due for the fourth quarter from the top 20 tenants and 100% of contractual rent for the quarter from its investment-grade tenants.
Notably, the theater industry, which represented 5.6% of annualized contractual rental revenues for Realty Income as of Dec 31, 2020, has been subject to disruption due to the coronavirus pandemic, raising concerns about the collectability of rent.
As of Dec 31, 2020, the receivables outstanding for its 77 theater properties aggregated $48.6 million, net of $23.7 million of reserves, and includes $7.8 million of straight-line rent receivables, net of $1.8 million of reserves. In addition, the monthly contractual rent associated with the 37 properties accounted for under the cash basis aggregated $2.8 million as of the same date.
Quarter in Detail
During fourth-quarter 2020, same-store rental revenues on 5,403 properties under lease slipped 3.2% to $307.4 million from the prior-year quarter. Same-store rental income was affected by reserves recorded in the reported quarter. Portfolio occupancy of 97.9% as of Dec 31, 2020, contracted 70 basis points (bps) both sequentially and year over year. The company generated a rent recapture rate of 100.3% on re-leasing activity.
During the reported quarter, Realty Income invested $1.01 billion in 70 properties and properties under development or expansion. This also includes $467.2 million in 11 properties in the U.K.
Around 68% of the rental revenues reaped from acquisitions during the December-end quarter came in from investment grade-rated tenants, their subsidiaries or affiliated companies.
The company sold 60 properties, generating net proceeds of $77.5 million, with a gain on sales of $22.7 million, during the October-December period.
Balance Sheet
Realty Income exited 2020 with cash and cash equivalents of $824.5 million, up from the $54 million witnessed at the end of 2019. In addition, the retail REIT has a $3-billion unsecured revolving credit facility, with an initial term that expires in March 2023 (subject to two six-month options to extend) as well as a $1-billion accordion feature that is subject to obtaining lender commitments. Markedly, there were no borrowings on its revolving credit facility as of Dec 31, 2020. Also, as of that date, the company had no commercial paper borrowings.
The company ended the fourth quarter with a net debt to adjusted EBITDAre ratio of 5.3x and a fixed charge coverage ratio of 5.1x.
During the fourth quarter, the company raised $655 million from the sale of common stock, at a weighted average price of $61.14 per share, primarily through its At-The-Market-Program. In addition, it issued $325 million of 0.750% senior unsecured notes due 2026 and $400 million of 1.800% senior unsecured notes due 2033. Further, the retail REIT issued £400 million through the issuance of 1.625% senior unsecured notes due 2030 in its debut Sterling-denominated public debt offering.
Outlook
Realty Income expects 2021 acquisition volume of more than $3.25 billion on the back of the company’s solid financial position and investment pipeline.
Management projects 2021 adjusted FFO per share of $3.44-$3.49, reflecting an increase of 1.5-2.9% over 2020.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Realty Income Corp. has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Realty Income Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Realty Income Corp. (O) Up 0.9% Since Last Earnings Report?
It has been about a month since the last earnings report for Realty Income Corp. (O - Free Report) . Shares have added about 0.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Realty Income Corp. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Realty Income Beats on Q4 FFO, Sees Solid Acquisition in 2021
Realty Income’s fourth-quarter 2020 adjusted AFFO per share of 84 cents surpassed the Zacks Consensus Estimate of 83 cents. However, the reported figure is down 2.3% from the prior-year quarter’s 86 cents. The better-than-expected performance reflects improved revenues in the quarter.
Total revenues for the reported quarter came in at $418.1 million, exceeding the Zacks Consensus Estimate of $417.5 million. The top-line figure also improved 5.2% year on year.
For 2020, the company reported adjusted FFO per share of $3.39, up from the prior year’s $3.32. Total revenues of $1.65 billion increased 10.7% year on year.
Realty Income also apprised of its rental receipts through Jan 31, 2021, and noted that it has collected 93.6% of contractual rent due for the fourth quarter. Further, the company has collected 89.9% of contractual rent due for the fourth quarter from the top 20 tenants and 100% of contractual rent for the quarter from its investment-grade tenants.
Notably, the theater industry, which represented 5.6% of annualized contractual rental revenues for Realty Income as of Dec 31, 2020, has been subject to disruption due to the coronavirus pandemic, raising concerns about the collectability of rent.
As of Dec 31, 2020, the receivables outstanding for its 77 theater properties aggregated $48.6 million, net of $23.7 million of reserves, and includes $7.8 million of straight-line rent receivables, net of $1.8 million of reserves. In addition, the monthly contractual rent associated with the 37 properties accounted for under the cash basis aggregated $2.8 million as of the same date.
Quarter in Detail
During fourth-quarter 2020, same-store rental revenues on 5,403 properties under lease slipped 3.2% to $307.4 million from the prior-year quarter. Same-store rental income was affected by reserves recorded in the reported quarter. Portfolio occupancy of 97.9% as of Dec 31, 2020, contracted 70 basis points (bps) both sequentially and year over year. The company generated a rent recapture rate of 100.3% on re-leasing activity.
During the reported quarter, Realty Income invested $1.01 billion in 70 properties and properties under development or expansion. This also includes $467.2 million in 11 properties in the U.K.
Around 68% of the rental revenues reaped from acquisitions during the December-end quarter came in from investment grade-rated tenants, their subsidiaries or affiliated companies.
The company sold 60 properties, generating net proceeds of $77.5 million, with a gain on sales of $22.7 million, during the October-December period.
Balance Sheet
Realty Income exited 2020 with cash and cash equivalents of $824.5 million, up from the $54 million witnessed at the end of 2019. In addition, the retail REIT has a $3-billion unsecured revolving credit facility, with an initial term that expires in March 2023 (subject to two six-month options to extend) as well as a $1-billion accordion feature that is subject to obtaining lender commitments. Markedly, there were no borrowings on its revolving credit facility as of Dec 31, 2020. Also, as of that date, the company had no commercial paper borrowings.
The company ended the fourth quarter with a net debt to adjusted EBITDAre ratio of 5.3x and a fixed charge coverage ratio of 5.1x.
During the fourth quarter, the company raised $655 million from the sale of common stock, at a weighted average price of $61.14 per share, primarily through its At-The-Market-Program. In addition, it issued $325 million of 0.750% senior unsecured notes due 2026 and $400 million of 1.800% senior unsecured notes due 2033. Further, the retail REIT issued £400 million through the issuance of 1.625% senior unsecured notes due 2030 in its debut Sterling-denominated public debt offering.
Outlook
Realty Income expects 2021 acquisition volume of more than $3.25 billion on the back of the company’s solid financial position and investment pipeline.
Management projects 2021 adjusted FFO per share of $3.44-$3.49, reflecting an increase of 1.5-2.9% over 2020.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Realty Income Corp. has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Realty Income Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.