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What's in the Cards for Realty Income's (O) Q1 Earnings?
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Realty Income Corp. (O - Free Report) is scheduled to report first-quarter 2021 results on May 3, after the bell. While the company’s results are anticipated to reflect year-over-year increase in revenues, its funds from operations (FFO) per share might display a decline.
In the last reported quarter, this monthly dividend-paying real estate investment trust (REIT) posted a surprise of 1.20% in terms of FFO per share. The better-than-expected performance reflected improved revenues in the quarter.
Over the trailing four quarters, the company surpassed estimates on three occasions and missed in the other, the average beat being 3.58%. This is depicted in the graph below:
Let’s see how things have shaped up prior to this announcement.
Factors to Consider
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 Cushman & Wakefield (CWK - Free Report) , the retail market conditions seemed to have improved in first-quarter 2021 thanks to the distribution of government stimulus payments and vaccinations acceleration that led to shoppers becoming more active.
Particularly, net absorption registered at -740,000 square feet, representing the lowest negative absorption recorded by far since the onset of the pandemic, while leasing activity, though down somewhat at 25 million square feet (msf), was still above the second-quarter 2020 low level. Moreover, retail vacancy expanded 10 basis points (bps) from the prior quarter to 7.3%.
For Realty Income, its essential retail tenants in its roster have been the saving grace during this crisis. The company’s top four industries (representing more than 37% of rental revenues) — convenience stores, grocery stores, drug stores, and dollar stores selling essential goods —continued to flourish even amid the pandemic. As such, the company has received nearly all of the contractual rent due from tenants in these industries since the pandemic started and this trend is likely to have continued in the first quarter as well.
Realty Income’s solid underlying real estate quality and prudent underwriting at acquisition has helped the company maintain high occupancy levels consistently. In the first quarter too, occupancy level is likely to have been healthy. Also, with the company’s high-quality real estate portfolio leased to large, well-capitalized clients, rent collections might have been decent.
Realty Income has also emerged as a company with decent financial health through its efforts to boost balance-sheet strength. This trend is likely to have continued in the first quarter as well. Moreover, situations have improved and with the vast majority of Realty Income’s retail locations now being open, rent collection trends are anticipated to improve further.
The Zacks Consensus Estimate for quarterly revenues is pegged at $432.6 million, suggesting a 4.4% increase from the year-ago quarter.
Nevertheless, retail businesses depend on customer traffic and consumers are still avoiding gathering in large public spaces due to the virus. This has taken a toll on tenants’ liquidity who are unable to meet rental obligations. Particularly, the company’s tenants from theater as well as health and fitness have been affected by the government-mandated closures and social-distancing requirements, leading to uncollected rent woes from these categories.
Realty Income’s activities during the soon-to-be-reported quarter were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the first-quarter FFO per share has remained unrevised at 85 cents in a month’s time. It also suggested a decline of 3.4% year on 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 Realty Income 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.
Realty Income currently carries a Zacks Rank #3 (Hold) and has an Earnings ESP of 0.00%.
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 have the right combination of elements to report a positive surprise this quarter:
National Storage Affiliates Trust (NSA - Free Report) , slated to release earnings figures on May 4, has an Earnings ESP of +1.84% and holds a Zacks Rank of 3, currently.
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.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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What's in the Cards for Realty Income's (O) Q1 Earnings?
Realty Income Corp. (O - Free Report) is scheduled to report first-quarter 2021 results on May 3, after the bell. While the company’s results are anticipated to reflect year-over-year increase in revenues, its funds from operations (FFO) per share might display a decline.
In the last reported quarter, this monthly dividend-paying real estate investment trust (REIT) posted a surprise of 1.20% in terms of FFO per share. The better-than-expected performance reflected improved revenues in the quarter.
Over the trailing four quarters, the company surpassed estimates on three occasions and missed in the other, the average beat being 3.58%. This is depicted in the graph below:
Realty Income Corporation Price and EPS Surprise
Realty Income Corporation price-eps-surprise | Realty Income Corporation Quote
Let’s see how things have shaped up prior to this announcement.
Factors to Consider
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 Cushman & Wakefield (CWK - Free Report) , the retail market conditions seemed to have improved in first-quarter 2021 thanks to the distribution of government stimulus payments and vaccinations acceleration that led to shoppers becoming more active.
Particularly, net absorption registered at -740,000 square feet, representing the lowest negative absorption recorded by far since the onset of the pandemic, while leasing activity, though down somewhat at 25 million square feet (msf), was still above the second-quarter 2020 low level. Moreover, retail vacancy expanded 10 basis points (bps) from the prior quarter to 7.3%.
For Realty Income, its essential retail tenants in its roster have been the saving grace during this crisis. The company’s top four industries (representing more than 37% of rental revenues) — convenience stores, grocery stores, drug stores, and dollar stores selling essential goods —continued to flourish even amid the pandemic. As such, the company has received nearly all of the contractual rent due from tenants in these industries since the pandemic started and this trend is likely to have continued in the first quarter as well.
Realty Income’s solid underlying real estate quality and prudent underwriting at acquisition has helped the company maintain high occupancy levels consistently. In the first quarter too, occupancy level is likely to have been healthy. Also, with the company’s high-quality real estate portfolio leased to large, well-capitalized clients, rent collections might have been decent.
Realty Income has also emerged as a company with decent financial health through its efforts to boost balance-sheet strength. This trend is likely to have continued in the first quarter as well. Moreover, situations have improved and with the vast majority of Realty Income’s retail locations now being open, rent collection trends are anticipated to improve further.
The Zacks Consensus Estimate for quarterly revenues is pegged at $432.6 million, suggesting a 4.4% increase from the year-ago quarter.
Nevertheless, retail businesses depend on customer traffic and consumers are still avoiding gathering in large public spaces due to the virus. This has taken a toll on tenants’ liquidity who are unable to meet rental obligations. Particularly, the company’s tenants from theater as well as health and fitness have been affected by the government-mandated closures and social-distancing requirements, leading to uncollected rent woes from these categories.
Realty Income’s activities during the soon-to-be-reported quarter were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the first-quarter FFO per share has remained unrevised at 85 cents in a month’s time. It also suggested a decline of 3.4% year on 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 Realty Income 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.
Realty Income currently carries a Zacks Rank #3 (Hold) and has an Earnings ESP of 0.00%.
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 have the right combination of elements to report a positive surprise this quarter:
Agree Realty Corporation (ADC - Free Report) , set to report quarterly numbers on May 3, currently has an Earnings ESP of +0.86% 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 earnings figures on May 4, has an Earnings ESP of +1.84% and holds a Zacks Rank of 3, currently.
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.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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