Regency Centers Corp. (REG Quick QuoteREG - Free Report) is slated to report fourth-quarter and full-year 2023 results on Feb 8 after the closing 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 Jacksonville, FL-based retail real estate investment trust (REIT) delivered a surprise of 0.99% in terms of NAREIT FFO per share. Results reflected healthy leasing activity and a year-over-year improvement in the base rent.

Over the trailing four quarters, the company’s FFO per share exceeded the Zacks Consensus Estimate on three occasions and met in the remaining quarter, with the average beat being 2.21%. This is depicted in the graph below:

Regency Centers Corporation Price and EPS Surprise

Regency Centers Corporation price-eps-surprise | Regency Centers Corporation Quote

US Retail Real Estate Market in Q4

Per a report from CBRE Group (CBRE Quick QuoteCBRE - Free Report) , the U.S. overall retail availability rate hit a record-low 4.7% at year-end, down 10 basis points (bps) quarter over quarter and 31 bps year over year. Among the categories, the neighborhood, community & strip center segment tightened the most. This property type continues to experience positive net absorption, with the fourth quarter net absorption of 12.5 million square feet, bringing the 2023 annual total to 40 million square feet.

There is a dearth of supply, and elevated construction costs and interest rates are likely to continue to keep new supply in check. Fourth-quarter and full-year construction completions of 5.3 million and 27 million square feet, respectively, marked record lows. The average asking rent was up by 0.8% in the fourth quarter and 2.4% for the year to $23.76 per square foot, and both the growth rates were higher than their 10-year averages, per the CBRE report.

Factors at Play

Regency enjoys a portfolio of high-quality open-air shopping centers in affluent suburban areas and near urban trade areas of the United States with compelling demographics. With more people continuing to move to the suburbs due to post-pandemic migration and the hybrid work setup, Regency’s suburban shopping center portfolio is expected to have benefited.

In a healthy retail real estate environment in the fourth quarter, we expect the company to have witnessed decent leasing activity, aiding occupancy rates at its properties.

Additionally, 80% of REG’s portfolio comprises grocery-anchored neighborhood and community centers, which are necessity-driven by nature. The company also has a good tenant mix, with several industry-leading grocers. This is likely to have helped the company generate stable rental revenues during the fourth quarter.

The Zacks Consensus Estimate for REG’s fourth-quarter revenues is pegged at $350.56 million, indicating an increase of 11.46% from the year-ago quarter’s reported figure.

The consensus mark for the company’s lease income for the quarter is pegged at $314.32 million, which calls for an increase from $305.19 in the prior-year quarter.

Furthermore, Regency, continuing with its asset-base expansion, closed the earlier announced acquisition of a neighborhood center, The Longmeadow Shops, in Longmeadow, MA, expanding its footprint of high-quality shopping centers in premier suburban trade areas with compelling demographics. The Longmeadow Shops is a premier shopping and dining destination within the trade area, encompassing 100,000 square feet of space that is currently 100% leased.

However, higher e-commerce adoption and a high interest rate environment are expected to have cast a pall on the company’s quarterly performance to some extent. Also, higher interest expenses during the quarter are likely to have been a spoilsport.

The company’s activities during the to-be-reported quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for quarterly FFO per share has remained unrevised at $1.02 over the past month. However, the figure implies growth of 4.08% from the prior-year quarter’s reported number.

For 2023, Regency Centers projected its NAREIT FFO per share in the range of $4.13-$4.15. This is backed by the company’s projection for the same-property NOI (excluding termination fees) of +/-1.5%.

For the full year, the Zacks Consensus Estimate for FFO per share is pegged at $4.15. The figure indicates an 8.36% increase year over year on 9.20% year-over-year growth in revenues to $1.34 billion.

Here Is What Our Quantitative Model Predicts:

Our proven model does not conclusively predict a surprise in terms of FFO per share for Regency 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 not the case here.

Regency currently carries a Zacks Rank of 3 and has an Earnings ESP of -0.45%. 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 two stocks from the broader REIT sector — VICI Properties Inc. (VICI Quick QuoteVICI - Free Report) and American Homes 4 Rent (AMH Quick QuoteAMH - Free Report) — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.

VICI Properties, scheduled to report quarterly numbers on Feb 22, has an Earnings ESP of +2.16% and carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Homes 4 Rent, slated to release quarterly numbers on Feb 22, has an Earnings ESP of +0.80% and carries a Zacks Rank of 3 at present.

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.