It has been about a month since the last earnings report for Realty Income Corp. (O - Free Report) . Shares have added about 8% 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 Q2 FFO Beats Estimates on Higher Revenues
Realty Income’s second-quarter 2019 adjusted FFO per share of 82 cents surpassed the Zacks Consensus Estimate of 81 cents. The reported figure is also up 2.5% from the prior-year quarter’s reported tally of 80 cents.
The company benefited from year-over-year growth in revenues as well as recorded modest same-store rent growth. It maintained its guidance for full-year 2019.
Total revenues for the reported quarter came in at $365.5 million, up 11.1% year over year. The revenue figure also exceeded the Zacks Consensus Estimate of $360.9 million.
Quarter in Detail
During second-quarter 2019, same-store rents on 4,863 properties under lease inched up 1.4% to $294 million from the prior-year quarter. Portfolio occupancy of 98.3% as of Jun 30, 2019, shrunk 40 basis points (bps) year over year and remained flat sequentially.
Further, the company had 102 properties available for lease, out of a total of 5,951 properties in the portfolio as of Jun 30, 2019, compared with 102 properties as of Mar 31, 2019. Additionally, during the quarter, the company re-leased 86 properties to existing and new tenants, at a rent recapture rate of 100.4 %.
During the second quarter, Realty Income invested $1.1 billion in 102 properties bringing the company total year-to-date investments to more than $1.6 billion. This includes £433.9 million (or nearly $549.2 million) of the company’s first international real estate investment in the U.K.
The investments are made at an average initial cash cap rate of 6.1% and with a weighted average lease term of 14.8 years. Around 12% of the rental revenues from acquisitions reported during the quarter came in from investment grade-rated tenants and their subsidiaries.
The company sold 18 properties for $28.6 million, with a gain on sales of $6.9 million, during the April-June period.
Finally, Realty Income exited second-quarter 2019 with cash and cash equivalents of $27.1 million, up from $10.4 million at the end of 2018. Furthermore, Realty Income raised $1 billion from the sale of common stock, at a weighted average price of $69.67 per share, during the reported quarter.
The company has a $3.25-billion unsecured credit facility, comprising a $3-billion revolving credit facility and a $250-million term loan. As of Jun 30, 2019, the balance of borrowings outstanding under its revolving credit facility was $8.0 million.
Realty Income expects full-year 2019 adjusted FFO per share of $3.28-$3.33.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
At this time, Realty Income Corp. has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Realty Income Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.