A month has gone by since the last earnings report for Realty Income Corp. (O - Free Report) . Shares have added about 2.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Realty Income Corp. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Realty Income's Q2 FFO Surpasses Estimates, View Up
Realty Income’s second-quarter 2018 adjusted FFO per share of 80 cents surpassed the Zacks Consensus Estimate of 79 cents. The reported figure also increased 5.3% from the prior-year tally of 76 cents.
The company benefited from year-over-year growth in revenues and also enjoyed high occupancy levels. Further, the company raised its guidance for 2018 adjusted FFO per share. It also increased its 2018 acquisitions guidance to around $1.75 billion from the previous projection of $1.0-$1.5 billion.
Total revenues for the reported quarter came in at $328.9 million, up 9.6% year over year. However, the revenue figure marginally missed the Zacks Consensus Estimate of $329.4 million.
Quarter in Detail
During second-quarter 2018, same-store rents on 4,731 properties under lease expanded 1.0% to $272.6 million from the prior-year quarter. Portfolio occupancy of 98.7% as of Jun 30, 2018, expanded 10 bps sequentially and 20 bps year over year.
Further, the company had 69 properties available for lease, out of a total of 5,483 properties in the portfolio as of Jun 30, 2018, compared with 75 properties as of Mar 31, 2018. Moreover, during the quarter, the company re-leased 47 properties to existing and new tenants, at a rent recapture rate of 107.6%.
During the quarter under review, Realty Income invested $347 million in 190 new properties and properties under development or expansion, situated in 24 states. The assets are fully leased, with a weighted average lease term of around 13.6 years, and an initial average cash lease yield of 6.5%. Around 52% of the rental revenues from acquisitions reported during the quarter came in from investment grade-rated tenants.
On the other hand, the company sold 26 properties for $33.7 million, with a gain on sales of $7.8 million, in Q2.
Finally, Realty Income exited second-quarter 2018 with cash and cash equivalents of $30.7 million, up from $6.9 million at the end of 2017.
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 Jun 30, 2018, Realty Income had borrowing capacity of $1.5 billion available on its revolving credit facility.
Furthermore, Realty Income raised $300.4 million from the sale of common stock, at a weighted average price of $53.44 per share, during the June-end quarter.
For full-year 2018, Realty Income raised its adjusted FFO per share guidance to $3.16-$3.21 from the prior range of $3.14-$3.20. This denotes annual growth of 3-5%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
At this time, Realty Income Corp. has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
The company's stock is suitable solely for momentum based on our style scores.
Realty Income Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.