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Why Is Realty Income (O) Up 1% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for Realty Income Corporation (O - Free Report) . Shares have added about 1% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is O due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Realty Income Meets Q1 FFO Estimates, Reiterates View

Realty Income’s first-quarter 2018 adjusted FFO per share of 79 cents came in line with the Zacks Consensus Estimate and increased 3.9% from the prior-year quarter.

The company benefited from revenue growth in the quarter and also attained its highest quarter-end occupancy in more than 10 years. Further, the company reiterated its guidance for 2018 adjusted FFO per share.

Total revenues for the reported quarter came in at $318.3 million, up 6.8% year over year. However, the reported figure missed the Zacks Consensus Estimate of $321.6 million.

Quarter in Detail

During first-quarter 2018, same-store rents on 4,747 properties under lease expanded 1.0% to $276.7 million from the prior-year quarter. Portfolio occupancy of 98.6% as of Mar 31, 2018, expanded 20 basis points (bps) sequentially and 30 bps year over year.

Further, the company had 75 properties available for lease, out of a total of 5,326 properties in the portfolio as of Mar 31, 2018, compared with 83 properties as of Dec 31, 2017. Moreover, during the reported quarter, it re-leased 55 properties to existing and new tenants, at a rent recapture rate of 100.4%.

Portfolio Activity

The company made solid property acquisitions in the quarter that are leased to mainly investment grade rated tenants. During the reported quarter, Realty Income invested $509.8 million in 174 new properties and properties under development or expansion, situated in 27 states. The assets are fully leased, with a weighted average lease term of around 14 years, and an initial average cash lease yield of 6.2%. Around 85% of the rental revenues from acquisitions reported during the quarter came in from investment grade-rated tenants.

On the other hand, during the quarter, the company sold 14 properties for $13.8 million, with a gain on sales of $3.2 million.

Liquidity

Finally, Realty Income exited first-quarter 2018 with cash and cash equivalents of $20.6 million, down from $6.9 million at the end of 2017.

However, the company has a $2.25-billion unsecured credit facility, comprising $2.0 billion revolving credit facility and a $250-million five-year unsecured term loan. The credit facility also bears a $1.0-billion expansion feature. As of Mar 31, 2018, Realty Income had borrowing capacity of $918 million available on its revolving credit facility.

Moreover, the borrowing capacity of the revolving credit facility improved to $1.4 billion, subsequent to the use of proceeds from the April notes offering to payback borrowings under the revolving credit facility.

Furthermore, Realty Income raised $2.3 million from the sale of common stock at a weighted average price of $51.08 per share during the first quarter.

Outlook

For full-year 2018, Realty Income reiterated its adjusted FFO per share of $3.14-$3.20.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter.

Realty Income Corporation Price and Consensus

 

VGM Scores

At this time, O has an average Growth Score of C, however its Momentum is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, O has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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