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Regency Centers (REG) to Post Q4 Earnings: What's in Store?

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Regency Centers Corp. (REG - Free Report) is slated to report fourth-quarter 2017 results on Feb 8, after the market closes. Both its revenues and funds from operations (FFO) are expected to experience year-over-year growth.

Last quarter, this Jacksonville, FL-based retail real estate investment trust (REIT) generated a positive surprise of 4.4%. Results reflected growth in same-property NOI and strong leasing activity during the quarter. The company also benefitted from the merger with Equity One in the quarter.

Further, the company has a solid surprise history. It beat the Zacks Consensus Estimate in each of the trailing four quarters with an average surprise of 4.6%. 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

However, the stock has lost 10.7% in the last three months, underperforming the 6% decline witnessed by the industry it belongs to.

Earnings Whispers

Our proven model does not conclusively show that Regency Center will likely beat estimates this season. 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. However, that is not the case here as you will see below.

Zacks ESP: Regency has an Earnings ESP of 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both are pegged at 91 cents.

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

Zacks Rank: Regency’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.

Factors That Might Impact Q4 Results

Regency focuses on building a premium portfolio of grocery-anchored shopping centers and neighborhood centers. Such centers are usually necessity driven and drive a dependable traffic. Also, 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 ones will likely help it ride the growth trajectory in the to-be-reported quarter.

Regency’s recent merger with Equity One helped the company in creating a high-quality portfolio of 429 properties that were mainly grocery anchored. The efficient moves have permitted Regency to already realize the anticipated $27 million of general and administration (G&A) cost synergies. In fact, management anticipates realizing another $27 million in G&A synergies in 2018. In the fourth-quarter too, we anticipate this merger to drive robust growth in its rental rates and occupancy levels.

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 estimated to be moderate this quarter.

Regency’s activities during the quarter could not gain adequate analyst confidence. Consequently, the Zacks Consensus Estimate for Q4 FFO has edged down 1.1% to 91 cents in a month’s time. However, it indicates a rise of 5.8% year-over-year.

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $257.6 million, indicating a year-over-year improvement of 68.4%.

For full-year 2017, the Zacks Consensus Estimate for revenues stands at $958.2 million, reflecting a year-over-year rise of 62.6%. The consensus estimate for FFO per share is $3.70, reflecting a year-over-year increase of 12.5%. Management expects core FFO per share in the range of $3.66-$3.70.

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 come up with a positive surprise this time around:

CubeSmart (CUBE - Free Report) is slated to release fourth-quarter results on Feb 15. The stock has an Earnings ESP of +1.10% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Diamondrock Hospitality Co. (DRH - Free Report) is scheduled to report quarterly numbers on Feb 26. The stock has an Earnings ESP of +4.76% and a Zacks Rank #3.

JLL (JLL - Free Report) , slated to release quarterly numbers on Feb 7, has an Earnings ESP of +1.83% and a Zacks Rank #2.

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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