Realty Income Corporation (O Quick QuoteO - Free Report) , a leader in the net lease sector, is slated to release first-quarter 2025 results on May 5, after market close. The Zacks Consensus Estimate for the to-be-reported quarter’s adjusted funds from operations (FFO) and revenues is pegged at $1.06 per share and $1.38 billion, respectively.

The Zacks Consensus Estimate for first-quarter 2025 adjusted FFO per share has remained unrevised at $1.06 over the past two months. However, it suggests 2.9% growth year over year. The Zacks Consensus Estimate for quarterly revenues implies a notable year-over-year increase of 9.2%.

Magnitude Consensus Estimate Trend (60 Days)

Image Source: Zacks Investment Research

For the current year, the Zacks Consensus Estimate for Realty Income’s revenues is pegged at $5.58 billion, implying a rise of 5.9% year over year. The consensus mark for 2025 adjusted FFO per share is pegged at $4.28, calling for an expansion of around 2.2% on a year-over-year basis. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Over the trailing four quarters, the company’s adjusted FFO per share surpassed the Zacks Consensus Estimate on one occasion, met twice and missed in the remaining period. This is depicted in the graph below:

Here is What Our Quantitative Model Predicts for O:

Our proven model does not conclusively predict a surprise in terms of FFO per share for Realty Income 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. You can see the complete list of today’s Zacks #1 Rank stocks here.

Realty Income currently carries a Zacks Rank of 3 and 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.

Resilient Business Model to Aid O’s Q1 Performance

With a well-diversified, high-quality real estate portfolio, Realty Income's earnings for the first quarter are expected to demonstrate consistent operational performance. It derives a majority of its annualized contractual rents from tenants with a service, non-discretionary, low-price-point component to their business, assuring stable revenue generation. O’s first-quarter results are expected to showcase robust occupancy levels, supported by its premium property portfolio and disciplined acquisition strategy. As of Dec. 31, 2024, its portfolio occupancy was 98.7%, with management projecting it to stay above 98% for the full year. The solid occupancy rate, driven by careful underwriting and a focus on premium assets, is expected to have played a key role in maintaining steady revenues and operational stability during the quarter.

Realty Income is expected to have maintained a strong balance sheet in the first quarter, bolstering its growth initiatives. As of Dec. 31, 2024, the company enjoyed A3/A- credit ratings from Moody’s and S&P, respectively, alongside $3.7 billion in liquidity. O is expected to continue to have experienced a manageable net debt to annualized pro-forma adjusted EBITDAre and a well-laddered debt maturity profile. However, elevated interest expenses may have posed a challenge. The company had a substantial debt burden, and its net debt as of Dec. 31, 2024 was approximately $26.73 billion.

Realty Income’s growth strategy has enhanced its long-term outlook, with the REIT broadening its portfolio beyond traditional retail into sectors such as industrial, gaming and data centers. Notable investments like Encore Boston Harbor and Bellagio Las Vegas and a partnership with Digital Realty (DLR Quick QuoteDLR - Free Report) for data centers show its forward-thinking approach. In addition to its collaboration with Digital Realty, O’s expanding presence in Europe and sizable addressable market provide a solid foundation for sustained growth and resilience against sector-specific risks. Its expansion efforts are likely to have continued in the first quarter, supporting top-line growth and enhancing earnings potential. The company is targeting approximately $4 billion in investment volume for full-year 2025.

The Zacks Consensus Estimate for quarterly revenues is pegged at $1.38 billion, which suggests a 9.2% increase from the year-ago quarter’s reported figure. The consensus mark for rental revenues (excluding reimbursable) is pegged at $1.25 billion, up from $1.20 billion recorded in the prior quarter and $1.14 billion in the year-ago quarter. 

While Realty Income has notable strengths, it also faces headwinds. In 2024, its bad debt provision rose to 75 basis points, largely due to issues with certain tenants acquired through M&A. Although management anticipates effective rent recapture, the presence of financially weaker tenants poses a potential short-term risk to cash flow stability.

O’s Price Performance & Valuation

Shares of Realty Income have rallied 6.9% so far in the year, closing at $57.17 yesterday on the NYSE. The Zacks REIT and Equity Trust - Retail industry has declined 6.6%, and the S&P 500 composite has dropped 5.1% over the same time frame.

YTD Price Performance

Image Source: Zacks Investment Research

Despite the price rally, Realty Income shares are still cheap. The stock is trading at a forward 12-month price-to-FFO of 13.89X, below the retail REIT industry average of 15.21X but slightly ahead of its one-year median of 13.11X. Although Realty Income stock is currently trading at a discount compared to its industry peers like Agree Realty Corporation (ADC Quick QuoteADC - Free Report) , this valuation disparity might not be as favorable as it seems. Agree Realty is trading at a forward 12-month price-to-FFO of 17.78X.

Forward 12 Month Price-to-FFO (P/FFO) Ratio

Image Source: Zacks Investment Research

Here’s How to Play Realty Income Ahead of Q1 Earnings?

Realty Income remains a top dividend stock, blending reliable income with growth potential. Its diversified tenant base and long-term net lease model provide stable cash flow, with much of its rent from essential, low-cost sectors. Expansion into the gaming industry and foray into data centers through Digital Realty reflects a strategic vision. Backed by a strong balance sheet, Realty Income is well-positioned for sustained growth. 

Although Realty Income trades at a relative discount compared to peers such as Agree Realty, investors might consider waiting for more visibility on policy shifts and broader economic conditions before assessing its appeal or potential risks. For existing shareholders, the stock’s reliable dividend growth and solid asset portfolio provide reasons to maintain their positions while monitoring the upcoming earnings and future developments.

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.