Back to top

Image: Bigstock

What's in the Offing for Regency (REG) This Earnings Season?

Read MoreHide Full Article

Regency Centers Corp. (REG - Free Report) is slated to report second-quarter 2022 results on Aug 4, after the closing bell. While the company’s revenues are likely to have witnessed year-over-year growth, FFO per share is expected to have declined.

In the last reported quarter, this Jacksonville, FL-based retail real estate investment trust (REIT) reported a surprise of 10.75% in terms of NAREIT FFO per share. The quarterly results reflect higher-than-anticipated top-line growth and robust leasing activity.

In the last four quarters, the company’s FFO per share exceeded the Zacks Consensus Estimate on three occasions and missed the same in the remaining quarter. It delivered a trailing four-quarter surprise of 8.30%, on average. This is depicted in the graph below:

Factors to Note

Per a report from CBRE Group (CBRE - Free Report) , retail real estate metrics remained strong in the second quarter despite weak retail sales growth.

During the quarter, total retail sales reflected year-over-year growth of 3.8%. However, the figure was lower than the five-year quarterly average of 7.0%.

Moreover, the retail space absorption was reported at 19.9 million square feet, indicating a fall of 40% quarter over quarter and 20% year over year. The CBRE Group report highlights that the second-quarter absorptions were mainly driven by an expansion by existing retailers as new developments remained muted. Also, the retail availability rate tanked to 5.1%, the lowest in 10 years.  

The average retail asking rent climbed 2.4% year over year to $22.39 per square foot in the second quarter, marking the highest growth in more than five years.

Regency is also expected to have benefited from the recovery in the retail real estate market. It has a high-quality open-air shopping center portfolio with 80% grocery-anchored neighborhood and community centers. The properties are mainly situated in affluent suburban areas and near urban trade areas where consumers have high spending power, enabling the company to attract top grocers and retailers. These centers being necessity driven, attract dependable traffic even during uncertain times.

Regency also maintains a high-quality tenant roster with numerous industry-leading grocers such as Publix, Kroger, Albertsons Companies and Amazon/Whole Foods as tenants. Further, six of its top 10 tenants are high-performing grocers.

The above-mentioned factors are likely to have aided REG’s second-quarter rental revenues.

The Zacks Consensus Estimate for second-quarter revenues is pegged at $297.8 million, suggesting an increase of 3.7% from the year-ago quarter’s reported figure.

Regency is also expected to have maintained adequate financial flexibility and continued its portfolio expansion through acquisitions, developments and redevelopments during the to-be-reported quarter.

However, the company has been facing supply chain challenges and labor shortages amid a high inflation environment. The labor shortage and the rising cost of materials are expected to have increased REG’s expenses during the quarter.

The Zacks Consensus Estimate for FFO per share has been unchanged at 95 cents over the past month. Further, the figure indicates a decline of 4% from the year-earlier period’s reported figure.

Earning Whispers

Regency has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an FFO beat.

Earnings ESP: Regency has an Earnings ESP of +0.13%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: REG currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks That Warrant a Look

Here are some other stocks that are worth considering from the REIT sector, as our model shows that these too have the right combination of elements to deliver a surprise this reporting cycle:

Host Hotels & Resorts (HST - Free Report) is scheduled to report quarterly figures on Aug 3. HST has an Earnings ESP of +9.18% and a Zacks Rank of 2 (Buy) currently.

Public Storage (PSA - Free Report) is slated to report quarterly numbers on Aug 4. PSA has an Earnings ESP of +0.31% and carries a Zacks Rank of 3.

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.