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Federal Realty (FRT) Beats on Q2 FFO & Revenues, Raises View

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Retail REIT — Federal Realty Investment Trust (FRT - Free Report) — posted second-quarter 2018 funds from operations (FFO) per share of $1.55, beating the Zacks Consensus Estimate of $1.53. Also, the reported figure compares favorably with the prior-year quarter tally of $1.49.

Results indicate solid leasing activity leading to healthy occupancy at its properties. Further, management noted that continued growth in property operating income (POI), as well as new retail and mixed-use openings support its dividend hike for 51 consecutive years.

Total revenues for the quarter grew 8.1% year over year to $224.9 million. However, the top line missed the Zacks Consensus Estimate of $227.9 million.

Quarter in Details

During the quarter under review, on a comparable space basis, Federal Realty signed 106 lease deals for 474,578 square feet of space. The leases were signed at an average rent of $34.75 per square feet, denoting cash-basis roll-over growth of 10%.

As of Jun 30, 2018, the company’s overall portfolio was 95% leased, up from 94.5% as on Jun 30, 2017. Comparable property portfolio was 95.5% leased as of Jun 30, 2018, up from 95.3% as on Jun 30, 2017.

In addition, POI for comparable properties climbed 3.6% for the June-end quarter.

Federal Realty exited second-quarter 2018 with cash and cash equivalents of approximately $56.1 million, significantly up from $15.2 million posted at the end of 2017.

Outlook

For 2018, Federal Realty increased its FFO per share guidance to $6.13 - $6.23 from $6.08-$6.24. The Zacks Consensus Estimate for the same is currently pegged at $6.18, which is within the company’s guided range.

Dividend Update

Concurrently, Federal Realty announced a quarterly cash dividend of $1.02 per share reflecting a 2% hike in dividends. The dividend will be paid on Oct 15 to shareholders on record as of Sep 21, 2018. The increased quarterly dividends mark 51 consecutive years of hike.

Our Take

Federal Realty’s portfolio of premium retail assets — mainly situated in the major coastal markets from Washington, D.C. to Boston, San Francisco and Los Angeles — along with a diverse tenant base, positions it well for decent growth. Efforts to improve the company’s operating performance through expansion, renovation and re-tenanting support long-term profitability.

Nevertheless, shrinking footfall at malls amid online retail taking precedence, store closures and bankruptcy of retailers might continue to hurt this retail REIT’s performance. Also, rate hike adds to its woes.

Federal Realty Investment Trust Price, Consensus and EPS Surprise
 

Federal Realty Investment Trust Price, Consensus and EPS Surprise | Federal Realty Investment Trust Quote

Federal Realty currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Kimco Realty Corp.’s (KIM - Free Report) second-quarter 2018 FFO came in at 37 cents per share, surpassing the Zacks Consensus Estimate of 36 cents. However, the reported tally came in lower than the year-ago figure of 38 cents.

Simon Property Group, Inc. (SPG - Free Report) reported Q2 FFO of $2.98 per share, which surpassed the Zacks Consensus Estimate of $2.91. The FFO per share figure also came in 20.6% higher than the year-ago tally of $2.47.

DDR Corp.’s (DDR - Free Report) second-quarter operating FFO per share of 49 cents surpassed the Zacks Consensus Estimate of 47 cents. Moreover, the figure compares favorably with the prior-year quarter figure of 59 cents.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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