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Solid Revenue Base to Support Realty Income's (O) Q3 Earnings
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Realty Income Corp.’s (O - Free Report) third-quarter 2023 results, slated to be released on Nov 6 after market close, are likely to reflect year-over-year growth in revenues and funds from operations (FFO) per share. The company’s solid portfolio of major industries that sell essential goods and services, and a well-diversified tenant base are likely to have supported revenue growth during the quarter.
The retail real estate investment trust (REIT) derives most of its annualized retail contractual rental revenues from tenants with a service, non-discretionary and/or low-price-point component to their business. These businesses are less susceptible to economic recessions and competition from Internet retailing, allowing for more reliable streams of income. This is expected to have aided Realty Income’s top-line growth during the third quarter.
Apart from retail properties, O’s portfolio comprises industrial and other properties. It targets industrial properties leased to industry leaders, mainly investment-grade rated companies. Hence, diversification helps mitigate the risk associated with a particular industry, region or asset type, boosting cash flows.
Moreover, O leases its properties under long-term net lease agreements. This shifts most of the property expenses to the tenant, paving the way for stable rental revenue generation.
In addition, benefiting from the healthy demand for its properties on the back of a robust retail real estate environment in the third quarter, Realty Income is likely to have witnessed decent leasing activity, aiding its occupancy growth. We expect occupancy to remain high at 99.2% in the quarter, up 20 basis points from the prior-quarter’s reported figure.
The Zacks Consensus Estimate for rental revenues (excluding reimbursable) is pegged at $922.4 million, up from $907.6 million recorded in the prior quarter and $781.9 million in the year-ago quarter.
Click here to learn about the other factors that are likely to have impacted O’s overall performance in the third quarter.
Projections for Q3 FFO & Revenues
The Zacks Consensus Estimate for quarterly revenues is pegged at $1.04 billion, suggesting a 23.7% increase from the year-ago quarter’s reported figure.
The consensus estimate for the quarterly FFO per share has been unchanged at $1.00 over the past month. The figure, however, implies 2.04% year-over-year growth.
Our View
Although healthy demand for its properties and a stable revenue base are likely to have supported O’s performance during the third quarter, higher quarterly interest expenses are expected to have marred the upside to some extent. Our estimate indicates a year-over-year rise of 30.7% in the company’s third-quarter interest expenses.
Simon Property Group, Inc. (SPG - Free Report) reported third-quarter 2023 FFO per share of $3.20, surpassing the Zacks Consensus Estimate of $2.98. Moreover, the figure increased 9.2% year over year.
Results reflected better-than-anticipated revenues on healthy leasing activity and a rise in the base rent per square foot and occupancy levels. However, higher property operating expenses and interest expenses partly offset the upsides. SPG also raised its 2023 FFO per share outlook.
Federal Realty Investment Trust’s (FRT - Free Report) third-quarter 2023 FFO per share of $1.65 surpassed the Zacks Consensus Estimate of $1.62. The bottom line also witnessed a rise of 3.8% from the year-ago quarter’s tally of $1.59.
Results reflected healthy leasing activity and occupancy levels at its properties. FRT has also tightened and increased its guidance for 2023 FFO per share.
The Macerich Company (MAC - Free Report) reported FFO per share, excluding financing expenses in relation to Chandler Freehold, of 44 cents, in line with the Zacks Consensus Estimate. However, the figure declined 4.3% from the year-ago quarter’s 46 cents.
The results reflected a year-over-year increase in quarterly revenues driven by a rise in occupancy. MAC also experienced an increase in same-center net operating income, including lease termination income, from the prior-year period.
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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Solid Revenue Base to Support Realty Income's (O) Q3 Earnings
Realty Income Corp.’s (O - Free Report) third-quarter 2023 results, slated to be released on Nov 6 after market close, are likely to reflect year-over-year growth in revenues and funds from operations (FFO) per share. The company’s solid portfolio of major industries that sell essential goods and services, and a well-diversified tenant base are likely to have supported revenue growth during the quarter.
The retail real estate investment trust (REIT) derives most of its annualized retail contractual rental revenues from tenants with a service, non-discretionary and/or low-price-point component to their business. These businesses are less susceptible to economic recessions and competition from Internet retailing, allowing for more reliable streams of income. This is expected to have aided Realty Income’s top-line growth during the third quarter.
Apart from retail properties, O’s portfolio comprises industrial and other properties. It targets industrial properties leased to industry leaders, mainly investment-grade rated companies. Hence, diversification helps mitigate the risk associated with a particular industry, region or asset type, boosting cash flows.
Moreover, O leases its properties under long-term net lease agreements. This shifts most of the property expenses to the tenant, paving the way for stable rental revenue generation.
In addition, benefiting from the healthy demand for its properties on the back of a robust retail real estate environment in the third quarter, Realty Income is likely to have witnessed decent leasing activity, aiding its occupancy growth. We expect occupancy to remain high at 99.2% in the quarter, up 20 basis points from the prior-quarter’s reported figure.
The Zacks Consensus Estimate for rental revenues (excluding reimbursable) is pegged at $922.4 million, up from $907.6 million recorded in the prior quarter and $781.9 million in the year-ago quarter.
Click here to learn about the other factors that are likely to have impacted O’s overall performance in the third quarter.
Projections for Q3 FFO & Revenues
The Zacks Consensus Estimate for quarterly revenues is pegged at $1.04 billion, suggesting a 23.7% increase from the year-ago quarter’s reported figure.
The consensus estimate for the quarterly FFO per share has been unchanged at $1.00 over the past month. The figure, however, implies 2.04% year-over-year growth.
Our View
Although healthy demand for its properties and a stable revenue base are likely to have supported O’s performance during the third quarter, higher quarterly interest expenses are expected to have marred the upside to some extent. Our estimate indicates a year-over-year rise of 30.7% in the company’s third-quarter interest expenses.
O currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Realty Income Corporation Price and EPS Surprise
Realty Income Corporation price-eps-surprise | Realty Income Corporation Quote
Performance of Other Retail REITs
Simon Property Group, Inc. (SPG - Free Report) reported third-quarter 2023 FFO per share of $3.20, surpassing the Zacks Consensus Estimate of $2.98. Moreover, the figure increased 9.2% year over year.
Results reflected better-than-anticipated revenues on healthy leasing activity and a rise in the base rent per square foot and occupancy levels. However, higher property operating expenses and interest expenses partly offset the upsides. SPG also raised its 2023 FFO per share outlook.
Federal Realty Investment Trust’s (FRT - Free Report) third-quarter 2023 FFO per share of $1.65 surpassed the Zacks Consensus Estimate of $1.62. The bottom line also witnessed a rise of 3.8% from the year-ago quarter’s tally of $1.59.
Results reflected healthy leasing activity and occupancy levels at its properties. FRT has also tightened and increased its guidance for 2023 FFO per share.
The Macerich Company (MAC - Free Report) reported FFO per share, excluding financing expenses in relation to Chandler Freehold, of 44 cents, in line with the Zacks Consensus Estimate. However, the figure declined 4.3% from the year-ago quarter’s 46 cents.
The results reflected a year-over-year increase in quarterly revenues driven by a rise in occupancy. MAC also experienced an increase in same-center net operating income, including lease termination income, from the prior-year period.
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.