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Why Is Realty Income Corp. (O) Up 2.6% 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 2.6% 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 Meets Q2 FFO Estimates, Raises 2021 View
Realty Income’s second-quarter 2021 adjusted FFO per share of 88 cents came in line with the Zacks Consensus Estimate. The reported figure also compares favorably with the prior-year quarter’s 86 cents.
Results reflect better-than-expected improvement in revenues. The retail REIT also raised its 2021 adjusted FFO per share guidance and increased the 2021 acquisitions volume projections to $4.5 billion.
Total revenues for the reported quarter came in at $464.3 million, exceeding the Zacks Consensus Estimate of $447.7 million. The top-line figure also climbed 12% year on year.
Realty Income also apprised of its rental receipts through Jun 30, 2021, and noted that it has collected 95.9% of contractual rent due for the second quarter across its total portfolio. Further, the company has collected 93.4% of contractual rent due for the second quarter from the top 20 tenants and 100% of contractual rent from its investment-grade tenants.The company has collected 38.3% of contractual rent due for the second quarter from the theater clients, and 94.4% of contractual rent from its health and fitness clients.
For July, the company has collected 99.4% of contractual rent across its total portfolio, inclusive of 98.9% collected from the theater clients.
Quarter in Detail
During second-quarter 2021, same-store rental revenues on 6,114 properties under lease inched up 0.5% to $373.8 million from the prior-year period. Portfolio occupancy of 98.5%, as of Jun 30, 2021, expanded 50 basis points (bps) sequentially and flat year over year. The company generated a rent recapture rate of 104.7% on re-leasing activity.
During the reported quarter, Realty Income invested $1.13 billion in 156 properties and properties under development or expansion. This includes $591.8 million in U.K. properties.
Around 54% of the rental revenues reaped from acquisitions during the June-end quarter came in from investment grade-rated tenants, their subsidiaries or affiliated companies.
The company sold 42 properties, generating net proceeds of $56.9 million, with a gain on sales of $14.9 million, during the April-June period.
Notably, the theater industry, which represented 5.4% of annualized contractual rental revenues for Realty Income as of Jun 30, 2021, has been subject to disruptions due to the coronavirus pandemic, raising concerns about the collectability of rent. However, as of Jun 30, 2021, the receivables outstanding for its 79 theater properties aggregated $77.9 million, inclusive of $9.1 million of straight-line rent receivables, and net of $40 million of reserves, inclusive of $2 million of straight-line rent reserves.
Balance Sheet
Realty Income exited second-quarter 2021 with cash and cash equivalents of $231.2 million, down from the $824.5 million witnessed at the end of 2020. As of Jun 30, 2021, the balance of borrowings outstanding under its revolving credit facility was $635.3 million, comprising entirely of Sterling-denominated borrowings of £460 million. Also, as of that date, the company had $650 million in commercial paper borrowings.
The company ended the second quarter with a net debt to EBITDAre ratio of 5.4x and a fixed charge coverage ratio of 6.0x.
During the second quarter, the company raised $457.5 million from the sale of common stock, at a weighted average price of $69.01 per share, mainly through its At-The-Market-Program.
Outlook
Management projects the 2021 adjusted FFO per share at $3.53 to $3.59, suggesting an increase of 4.1-5.9% over 2020. The adjusted FFO per share excludes the merger-related costs related to the proposed VEREIT merger.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Realty Income Corp. has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. 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 2.6% 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 2.6% 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 Meets Q2 FFO Estimates, Raises 2021 View
Realty Income’s second-quarter 2021 adjusted FFO per share of 88 cents came in line with the Zacks Consensus Estimate. The reported figure also compares favorably with the prior-year quarter’s 86 cents.
Results reflect better-than-expected improvement in revenues. The retail REIT also raised its 2021 adjusted FFO per share guidance and increased the 2021 acquisitions volume projections to $4.5 billion.
Total revenues for the reported quarter came in at $464.3 million, exceeding the Zacks Consensus Estimate of $447.7 million. The top-line figure also climbed 12% year on year.
Realty Income also apprised of its rental receipts through Jun 30, 2021, and noted that it has collected 95.9% of contractual rent due for the second quarter across its total portfolio. Further, the company has collected 93.4% of contractual rent due for the second quarter from the top 20 tenants and 100% of contractual rent from its investment-grade tenants.The company has collected 38.3% of contractual rent due for the second quarter from the theater clients, and 94.4% of contractual rent from its health and fitness clients.
For July, the company has collected 99.4% of contractual rent across its total portfolio, inclusive of 98.9% collected from the theater clients.
Quarter in Detail
During second-quarter 2021, same-store rental revenues on 6,114 properties under lease inched up 0.5% to $373.8 million from the prior-year period. Portfolio occupancy of 98.5%, as of Jun 30, 2021, expanded 50 basis points (bps) sequentially and flat year over year. The company generated a rent recapture rate of 104.7% on re-leasing activity.
During the reported quarter, Realty Income invested $1.13 billion in 156 properties and properties under development or expansion. This includes $591.8 million in U.K. properties.
Around 54% of the rental revenues reaped from acquisitions during the June-end quarter came in from investment grade-rated tenants, their subsidiaries or affiliated companies.
The company sold 42 properties, generating net proceeds of $56.9 million, with a gain on sales of $14.9 million, during the April-June period.
Notably, the theater industry, which represented 5.4% of annualized contractual rental revenues for Realty Income as of Jun 30, 2021, has been subject to disruptions due to the coronavirus pandemic, raising concerns about the collectability of rent. However, as of Jun 30, 2021, the receivables outstanding for its 79 theater properties aggregated $77.9 million, inclusive of $9.1 million of straight-line rent receivables, and net of $40 million of reserves, inclusive of $2 million of straight-line rent reserves.
Balance Sheet
Realty Income exited second-quarter 2021 with cash and cash equivalents of $231.2 million, down from the $824.5 million witnessed at the end of 2020. As of Jun 30, 2021, the balance of borrowings outstanding under its revolving credit facility was $635.3 million, comprising entirely of Sterling-denominated borrowings of £460 million. Also, as of that date, the company had $650 million in commercial paper borrowings.
The company ended the second quarter with a net debt to EBITDAre ratio of 5.4x and a fixed charge coverage ratio of 6.0x.
During the second quarter, the company raised $457.5 million from the sale of common stock, at a weighted average price of $69.01 per share, mainly through its At-The-Market-Program.
Outlook
Management projects the 2021 adjusted FFO per share at $3.53 to $3.59, suggesting an increase of 4.1-5.9% over 2020. The adjusted FFO per share excludes the merger-related costs related to the proposed VEREIT merger.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Realty Income Corp. has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Realty Income Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.