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Is a Beat in Store for Federal Realty (FRT) in Q2 Earnings?
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Federal Realty Investment Trust (FRT - Free Report) , a leading real estate investment trust (REIT) focused on retail properties, is set to report its second-quarter earnings for 2023 on Aug 2 after market close. In anticipation of the announcement, industry analysts and investors are eager to assess the company's performance and prospects in the current economic climate.
In the last reported quarter, this retail REIT reported a surprise of 1.27% in terms of FFO per share. Results reflected healthy leasing activity and occupancy levels at its properties.
Over the last four quarters, Federal Realty surpassed estimates on all occasions, the average beat being 3.79%. The graph below depicts the surprise history of the company:
Federal Realty Investment Trust Price and EPS Surprise
In this article, we will dive deep into the U.S. retail real estate market environment and the company's fundamentals and analyze the factors that may have contributed to its second-quarter 2023 performance.
US Retail Real Estate Market in Q2
Per a report from CBRE Group (CBRE - Free Report) , in the U.S. retail real estate market, rent growth recommenced in the second quarter of 2023 despite the lower demand for space.
During the quarter, the net absorption of U.S. retail space amounted to 5.9 million square feet, representing the lowest level of demand since the sector experienced a negative net absorption of 10.1 million square feet in the third quarter of 2020. However, due to elevated construction costs and economic concerns, construction completions remained at historically low levels.
Amid these, the overall availability rate declined by 10 basis points (bps) in the second quarter to a record low of 4.8%. Additionally, the average asking rent experienced a year-over-year increase of 2.1%, reaching $23.21 per square foot. This growth was primarily driven by significant gains in Raleigh and various Florida markets, per the CBRE Group report.
Factors to Note
Federal Realty is anticipated to have benefited from the recovery in the retail real estate market. The company has a portfolio of premium retail assets, mainly situated in major coastal markets from Washington, D.C. to Boston, San Francisco and Los Angeles. FRT’s properties are strategically located in the first-ring suburbs of major metropolitan markets of the United States, aiding its second-quarter cash flows.
Due to strong demographics and the infill nature of its properties, the company has been able to maintain a high occupancy level over the years. FRT’s well-diversified tenant base of retailers is expected to have led to steady rental revenue generation in the second quarter. We estimate FRT’s leased rate at 94.3%, reflecting a 10-basis point increase sequentially. Moreover, Federal Realty’s solid balance-sheet position is likely to have supported its acquisition and development activities in the second quarter.
FRT's strategic focus on mixed-use properties enables the company to benefit from multiple revenue streams. By combining residential, retail and office spaces, these properties attract a variety of tenants, creating a vibrant, bustling atmosphere that draws in consumers. This diversification is likely to have played a crucial role in FRT's second-quarter 2023 performance as it insulates the company from the fluctuations and uncertainties of a single sector.
Projections for Q2 2023
The Zacks Consensus Estimate for quarterly revenues is pegged at $277.0 million, calling for a 4.9% increase from the year-ago period. The consensus mark for rental revenues is pegged at $276.72 million, suggesting a rise from the year-ago period’s $263.83 million.
Rental income from minimum rents — commercial — is presently pegged at $179.64 million, up from $170.92 in the year-ago period. Rental income from cost reimbursements is projected at $50.71 million, up from $46.46 million in the prior-year period.
Federal Realty’s activities during the soon-to-be-reported quarter were adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the second-quarter FFO per share has been revised a cent upward to $1.62 in the past month. However, it suggests a 1.82% decline year over year.
Here Is What Our Quantitative Model Predicts:
Our proven model predicts a surprise in terms of FFO per share for Federal Realty this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is the case here.
Federal Realty currently has a Zacks Rank of 3 and an Earnings ESP of +0.31%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks to Consider
Here are two other stocks from the REIT sector — Simon Property Group (SPG - Free Report) and Ventas (VTR - Free Report) — that you may want to consider as our model shows that these also have the right combination of elements to report a surprise this quarter.
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.
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Is a Beat in Store for Federal Realty (FRT) in Q2 Earnings?
Federal Realty Investment Trust (FRT - Free Report) , a leading real estate investment trust (REIT) focused on retail properties, is set to report its second-quarter earnings for 2023 on Aug 2 after market close. In anticipation of the announcement, industry analysts and investors are eager to assess the company's performance and prospects in the current economic climate.
In the last reported quarter, this retail REIT reported a surprise of 1.27% in terms of FFO per share. Results reflected healthy leasing activity and occupancy levels at its properties.
Over the last four quarters, Federal Realty surpassed estimates on all occasions, the average beat being 3.79%. The graph below depicts the surprise history of the company:
Federal Realty Investment Trust Price and EPS Surprise
Federal Realty Investment Trust price-eps-surprise | Federal Realty Investment Trust Quote
In this article, we will dive deep into the U.S. retail real estate market environment and the company's fundamentals and analyze the factors that may have contributed to its second-quarter 2023 performance.
US Retail Real Estate Market in Q2
Per a report from CBRE Group (CBRE - Free Report) , in the U.S. retail real estate market, rent growth recommenced in the second quarter of 2023 despite the lower demand for space.
During the quarter, the net absorption of U.S. retail space amounted to 5.9 million square feet, representing the lowest level of demand since the sector experienced a negative net absorption of 10.1 million square feet in the third quarter of 2020. However, due to elevated construction costs and economic concerns, construction completions remained at historically low levels.
Amid these, the overall availability rate declined by 10 basis points (bps) in the second quarter to a record low of 4.8%. Additionally, the average asking rent experienced a year-over-year increase of 2.1%, reaching $23.21 per square foot. This growth was primarily driven by significant gains in Raleigh and various Florida markets, per the CBRE Group report.
Factors to Note
Federal Realty is anticipated to have benefited from the recovery in the retail real estate market. The company has a portfolio of premium retail assets, mainly situated in major coastal markets from Washington, D.C. to Boston, San Francisco and Los Angeles. FRT’s properties are strategically located in the first-ring suburbs of major metropolitan markets of the United States, aiding its second-quarter cash flows.
Due to strong demographics and the infill nature of its properties, the company has been able to maintain a high occupancy level over the years. FRT’s well-diversified tenant base of retailers is expected to have led to steady rental revenue generation in the second quarter. We estimate FRT’s leased rate at 94.3%, reflecting a 10-basis point increase sequentially. Moreover, Federal Realty’s solid balance-sheet position is likely to have supported its acquisition and development activities in the second quarter.
FRT's strategic focus on mixed-use properties enables the company to benefit from multiple revenue streams. By combining residential, retail and office spaces, these properties attract a variety of tenants, creating a vibrant, bustling atmosphere that draws in consumers. This diversification is likely to have played a crucial role in FRT's second-quarter 2023 performance as it insulates the company from the fluctuations and uncertainties of a single sector.
Projections for Q2 2023
The Zacks Consensus Estimate for quarterly revenues is pegged at $277.0 million, calling for a 4.9% increase from the year-ago period. The consensus mark for rental revenues is pegged at $276.72 million, suggesting a rise from the year-ago period’s $263.83 million.
Rental income from minimum rents — commercial — is presently pegged at $179.64 million, up from $170.92 in the year-ago period. Rental income from cost reimbursements is projected at $50.71 million, up from $46.46 million in the prior-year period.
Federal Realty’s activities during the soon-to-be-reported quarter were adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the second-quarter FFO per share has been revised a cent upward to $1.62 in the past month. However, it suggests a 1.82% decline year over year.
Here Is What Our Quantitative Model Predicts:
Our proven model predicts a surprise in terms of FFO per share for Federal Realty this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is the case here.
Federal Realty currently has a Zacks Rank of 3 and an Earnings ESP of +0.31%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks to Consider
Here are two other stocks from the REIT sector — Simon Property Group (SPG - Free Report) and Ventas (VTR - Free Report) — that you may want to consider as our model shows that these also have the right combination of elements to report a surprise this quarter.
Simon Property Group is slated to report quarterly numbers on Aug 2. SPG has an Earnings ESP of +0.73% and carries a Zacks Rank of 3 presently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ventas, scheduled to report quarterly numbers on Aug 3, has an Earnings ESP of +1.75% and carries a Zacks Rank of 2 presently.
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.