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Here's How Kimco Realty (KIM) is Placed Ahead of Q4 Earnings

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Kimco Realty Corporation (KIM - Free Report) is slated to report fourth-quarter and full-year 2021 results on Feb 10 before the bell. The company’s quarterly results are likely to display year-over-year growth in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Jericho, NY-based retail real estate investment trust (REIT) posted a surprise of 6.67% in terms of FFO per share. Results reflected better-than-anticipated revenues.

Kimco beat the Zacks Consensus Estimate in all the preceding four quarters, the average beat being 7.42%. This is depicted in the graph below:

Kimco Realty Corporation Price and EPS Surprise

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 before this announcement.

Factors at Play

Per a report from CBRE Group, total retail sales increased 16.9% year over year in the fourth quarter, reflecting the strength of a strong holiday shopping season in 2021. The fourth quarter marked the fifth consecutive quarter of positive retail absorption (+20.6 million square feet). Also, the average asking rent improved 1.6% year over year to $21.87 per square foot in the fourth quarter as prime space grew scarce.

The overall retail availability rate shrunk by 30 basis points in the December-end quarter to a 10-year low of 5.6%. New construction deliveries remained muted in the fourth quarter, with 23.5 million square feet delivered in 2021, down 36% year over year. The scarcity of new prime space has fueled occupancy levels and aided growth in rents.

Kimco is expected to benefit from its ownership of high-quality assets concentrated in top major metro markets, which offer several growth levers. Apart from these, having a grocery component has been the saving grace of retail REITs amid the global health crisis and for Kimco, a significant chunk of its annual base rent comes from grocery-anchored centers.

With a well-located and largely grocery-anchored portfolio that offers essential goods and services, rent-collection figures are likely to have been healthy during the fourth quarter. The curbside pick-up program is anticipated to have aided KIM’s performance during the quarter under consideration.

Also, Kimco has achieved significant diversification concerning geography and tenants, which is likely to have supported the company’s cash flows during the period in discussion. Apart from these, the company has been making moves to bolster its financial flexibility. In the fourth quarter, Kimco is expected to have continued to maintain its decent balance-sheet position.

Amid these, the company’s top line is expected to improve. The Zacks Consensus Estimate for KIM’s quarterly revenues stands at $406.83 million, calling for 50.99% growth from the prior-year quarter.

Moreover, Kimco remained focused on strategic expansion and in the fourth quarter, Kimco announced the acquisition of the remaining 70% stake in a portfolio of six Publix-anchored, Sunbelt region shopping centers for a gross purchase price of $425.8 million from its existing joint venture (JV) partner, Jamestown. Consequently, Kimco entered into a JV partnership with Blackstone Real Estate Income Trust, Inc., wherein KIM will own 50% of the portfolio, with the latter owning the remaining 50%. However, on behalf of the JV, Kimco will continue to manage the portfolio. It had initially acquired a 30% stake in the portfolio through its recent Weingarten merger.
Six Publix-anchored assets aggregated more than 1.2 million square feet of gross leasable area in in-fill markets throughout the Southeast. Five properties are located in the top-performing South Florida market and one in the high-growth Atlanta market.

Kimco’s activities during the soon-to-be-reported quarter were adequate to gain analysts’ confidence. The Zacks Consensus Estimate for fourth-quarter FFO per share has been revised a cent upward to 37 cents in two months. It also suggests 19.4% growth year over year.

However, store closures and tenant bankruptcy remain concerns. The pandemic and the resultant higher e-commerce adoption might have affected its growth tempo to some extent during the quarter under consideration.

For 2021, Kimco projected NAREIT FFO per share in the range of $1.36-$1.37.

For the full year, the Zacks Consensus Estimate for FFO per share has moved 1.5% north to $1.36 over the past two months. The figure indicates a 16.24% increase year over year on revenues of $1.35 billion.

Here Is What Our Quantitative Model Predicts:

Our proven model does not conclusively predict a 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 an FFO beat. However, that’s not the case here.

Kimco currently carries a Zacks Rank #2 and has an Earnings ESP of -0.30%. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are three stocks from the retail REIT sector — Retail Opportunity Investments Corp. (ROIC - Free Report) , Regency Centers Corporation (REG - Free Report) and STORE Capital Corporation (STOR - Free Report) — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.

Retail Opportunity Investments Corp., slated to release fourth-quarter earnings on Feb 16, has an Earnings ESP of +1.30% and carries a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Regency Centers Corporation, scheduled to report quarterly numbers on Feb 10, has an Earnings ESP of +0.67% and carries a Zacks Rank of 3.

STORE Capital, slated to report quarterly numbers on Feb 23, has an Earnings ESP of +1.45% and carries a Zacks Rank of 2.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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.