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Simon Property (SPG) to Report Q2 Earnings: What's in Store?

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Simon Property Group Inc. (SPG - Free Report) is expected to report second-quarter 2017 results on Aug 1, before the market opens.

In the last reported quarter, this Indianapolis, IN-based retail real estate investment trust (“REIT”) witnessed a negative surprise of 0.72% in terms of funds from operations (“FFO”) per share.

However, over the trailing four quarters, the company exceeded the Zacks Consensus Estimate in three occasions and missed in the other, with an average beat of 4.09%. This is depicted in the graph below:

Simon Property has lost 9.1% of its value year to date versus the 4.5% decline of its industry.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Simon Property enjoys a wide exposure to retail assets across the U.S. Moreover, the company’s international presence fosters sustainable long-term growth as compared with its domestically focused peers.

In order to strengthen its relationship with customers, Simon Property has been undertaking various initiatives in recent times. The company re-launched its brand and marketing programs. In addition, with the omni-channel strategy gaining popularity among retailers, the company is initiating programs and events, as well as entering into several partnerships for upgrading services and amenities provided to its customers. In fact, over the last five years, the retail REIT invested over $5 billion in development projects and intends to spend around $1 billion each in 2017 and 2018.

However, rising consumer purchases through the internet emerged as a pressing concern for retail REITs. The declining mall traffic and store closures amid aggressive growth in online sales kept retail REITs on tenterhooks.

While the company is striving to counter such pressure through various moves, the implementation of such measures requires a decent upfront cost. Consequently, this would limit any robust growth in its profit margins in the to-be-reported quarter.

Amid these, prior to the second-quarter earnings release, there is lack of any solid catalyst. As such, the Zacks Consensus Estimate of FFO per share for the to-be-reported quarter remained unchanged at $2.44 over the past seven days.

Earnings Whispers

Our proven model does not conclusively show that Simon Property will likely beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP for Simon Property is 0.00%. This is because the Most Accurate estimate of $2.44 matches the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Simon Property’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

Stocks That Warrant a Look

Here are a few stocks in the REIT space that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this time around:

CyrusOne Inc. (CONE - Free Report) , likely to release earnings on Aug 2, has an Earnings ESP of +2.70% and a Zacks Rank #2.

Piedmont Office Realty Trust, Inc. (PDM - Free Report) , expected to release earnings on Aug 2, has an Earnings ESP of +2.27% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

AvalonBay Communities, Inc. (AVB - Free Report) , likely to release second-quarter numbers on Aug 2, has an Earnings ESP of +0.94% and a Zacks Rank #3.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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