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What's in the Cards for Kimco (KIM) This Earnings Season?

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Kimco Realty Corporation (KIM - Free Report) is slated to report fourth-quarter and full-year 2022 results on Feb 9 before the bell. While the company’s quarterly results are likely to display year-over-year revenue growth, funds from operations (FFO) per share are expected to have been on par with the prior-year quarter’s reported figure.

In the last reported quarter, this Jericho, NY-based retail real estate investment trust (REIT) delivered a surprise of 5.13% in terms of FFO per share. The quarterly results reflected year-over-year top-line growth. The rise in occupancy levels and rental rate growth aided Kimco’s performance.

Over the preceding four quarters, Kimco’s FFO per share surpassed the Zacks Consensus Estimate on each occasion, the average beat being 5.30%. 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

Factors at Play

Per a report from CBRE Group (CBRE - Free Report) , retail real estate markets remained robust in the fourth quarter, with resilient demand driving the retail availability rate to 4.9% after hitting a high of 6.6% in fourth-quarter 2020.

The core retail sales, excluding motor vehicles, gasoline and auto parts, climbed 7.1% from the prior-year period. The non-store retail sales, which include e-commerce, grew 11.3%.

The retail asking rent improved 2.5% year over year for the second consecutive quarter to $22.78 per square foot in the fourth quarter. This was primarily driven by strong demand and limited new supply.

Retail space absorption came in at 12.7 million square feet for fourth-quarter 2022, marking the ninth consecutive quarter of positive retail absorption per the CBRE Group report.

Kimco is anticipated to have benefited from the above-mentioned factors.

The increase in consumers’ preference for in-person shopping experiences following the pandemic downtime has been driving the recovery in the retail real estate industry. Given this backdrop, the demand for Kimco’s high-quality properties in the drivable first-ring suburbs of its top major metropolitan Sunbelt and coastal markets, with several growth levers like high employment and strong spending power, is likely to have aided its fourth-quarter cashflows.

With a well-located and largely grocery-anchored portfolio, which offers essential goods and services, KIM’s occupancy levels and leasing activity are likely to have been robust during the fourth quarter. Moreover, Kimco’s significant diversification with respect to geography and tenants is expected to have led to steady rental revenue generation during the fourth quarter.

Kimco has been focusing on its mixed-use assets clustered in strong economic metropolitan statistical areas that serve the last mile. This segment is gaining from the recovery in the apartment and retail sectors. Through a selected collection of mixed-use projects, redevelopments and active investment management, KIM has been targeting to increase its net asset value, which is likely to have played to its strengths in the fourth quarter.

The company’s top line is expected to have improved amid these tailwinds. The Zacks Consensus Estimate for KIM’s quarterly revenues stands at $433.1 million, implying 1.9% growth from the prior-year reported number.

The Zacks Consensus Estimate for revenues from the rental property is currently pegged at $434 million, up from $429 million reported in the prior quarter and $420 million in the year-ago period.

Kimco has remained focused on strategic expansions to enhance its portfolio quality. In the fourth quarter, it acquired a private, multi-generationally-owned portfolio of eight shopping centers in Long Island, NY, for $375.8 million. The buyout added 540,000 square feet of retail space to Kimco’s portfolio, further strengthening its position as one of Long Island’s largest owners of grocery-anchored shopping centers.

However, rising interest expenses are anticipated to have cast a pall in fourth-quarter 2022.

The company’s activities during the to-be-reported quarter were not adequate to garner analysts’ confidence. The Zacks Consensus Estimate for KIM’s fourth-quarter FFO per share has been unchanged at 39 cents over the past month. Moreover, the figure is likely to have remained on par with the prior-year quarter’s reported figure.

For 2022, Kimco projected FFO per share in the range of $1.57-$1.59.

For the full year, the Zacks Consensus Estimate for FFO per share has been unchanged at $1.58 over the past two months. Nonetheless, the figure indicates 14.5% growth year over year on revenues of $1.71 billion.

Earnings Whisper

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 #3 (Hold) or higher — increases the odds of a beat. However, that’s not the case here.

Earnings ESP: Kimco has an Earnings ESP of -0.77%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Stocks That Warrant a Look

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

Federal Realty Investment Trust (FRT - Free Report) is scheduled to report quarterly figures on Feb 8. FRT has an Earnings ESP of +0.32% and a Zacks Rank of 3 currently.

Regency Centers (REG - Free Report) is slated to report quarterly numbers on Feb 9. REG has an Earnings ESP of +0.47% 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 FFO — a widely used metric to gauge the performance of REITs.

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