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Here is What Regency Centers (REG) Q2 Earnings Might Unveil

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Regency Centers Corporation (REG - Free Report) is slated to report second-quarter 2017 results on Aug 3, after the market closes. Its revenues and funds from operations (“FFO”) for the quarter are expected to witness year-over-year growth.

This Jacksonville, FL-based retail real estate investment trust (“REIT”) generated a positive surprise of 8.43% in the prior quarter. Results were backed by higher-than-expected growth in revenues.

The company beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3.01%. This is depicted in the graph below.

Regency Centers Corporation Price and EPS Surprise

Regency Centers Corporation Price and EPS Surprise | Regency Centers Corporation Quote

Note: The EPS presented in the above chart represents funds from operations (FFO) per share.

Factors to Influence Q2 results

Regency specializes in building a premium portfolio of grocery-anchored shopping centers and neighborhood centers. Such centers are usually necessity driven and drive a dependable traffic. The company’s solid experience in the retail real estate industry with well-known grocers as tenants and its preference of long-term leases over the short term one should help the company to ride on the growth trajectory. Earlier this March, Regency announced the closure of the Equity One merger deal, which helped in creating a high-quality portfolio of 429 properties, mainly grocery anchored. This merger enhanced the company’s concentration in affluent and in-field trade areas with solid demographics, which is likely to lure reputed retailers to its centers. This, in turn, will likely drive the company’s rental rates and occupancy levels over the long term.

Additionally, Regency has made solid progress in the Equity One merger integration. Regency has already realized $27 million of G&A synergies.

Amid these, the company's estimates moved up, reflecting analysts' bullish sentiments. The Zacks Consensus Estimate for Q2 FFO has moved up 89 cents over the past 30 days.

With online retailers venturing into the grocery business, shift of sales from the brick and mortar space to online stores is emerging as a pressing concern. This is adversely affecting the retail tenants’ sales, leading them to reconsider their footprint and opt for store closures, thereby resulting in lesser demand for retail real estate space. In fact, amid this environment, same-property net operating income is anticipated to moderate in the near term.

Further, growing development and redevelopment projects pipeline, geographic concentration of Regency’s properties and hike in interest rates might mar the company’s financial results.

Earnings Whispers

Our proven model does not conclusively show that Regency will likely beat FFO estimates this time around. 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. That is not the case here as you will see below.

(You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.)

Zacks ESP: Regency has an Earnings ESP of 0.00%, as both the Most Accurate estimate and the Zacks Consensus Estimate are currently pegged at 89 cents.

Zacks Rank: Regency’s Zacks Rank #2 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

Meanwhile, the stock has lost 2.4% year to date versus the 3.3% decline of the industry it belongs to.

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 post an earnings beat this time around:

Condor Hospitality Trust, Inc. (CDOR - Free Report) , slated to release earnings on Aug 7, has an Earnings ESP of +16% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

FelCor Lodging Trust Incorporated , scheduled to release earnings on Aug 9, has an Earnings ESP of +6.9% and a Zacks Rank #3.

Senior Housing Properties Trust (SNH - Free Report) , set to release earnings on Aug 3, has an Earnings ESP of +2.2% and a Zacks Rank #3.

Note: 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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