It has been about a month since the last earnings report for Realty Income Corp. (O - Free Report) . Shares have lost about 3.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Realty Income Corp. due for a breakout? 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 drivers.
Realty Income Tops Q3 FFO Estimates, Misses on Revenues
Realty Income’s third-quarter 2019 adjusted FFO per share of 83 cents came in line with the Zacks Consensus Estimate. The reported figure is also up 2.5% from the prior-year quarter’s reported tally of 81 cents.
Results were driven by improvement in same-store rent and top-line expansion.
Total revenues for the reported quarter came in at $374.2 million, up 10.7% year over year. However, the revenue figure lagged the Zacks Consensus Estimate of $375.8 million.
Quarter in Detail
During third-quarter 2019, same-store rents on 4,836 properties under lease inched up 1.2% to $293.7 million from the prior-year quarter. Portfolio occupancy of 98.3% as of Sep 30, 2019, shrunk 50 basis points (bps) year over year and remained flat sequentially.
Further, the company had 102 properties available for lease, out of a total of 5,964 properties in the portfolio as of Sep 30, 2019, compared with 102 properties as of Jun 30, 2019. Additionally, during the quarter, the company re-leased 29 properties to existing and new tenants, at a rent recapture rate of 101.5 %.
During the third quarter, Realty Income invested $411.5 million in 51 properties, bringing the company’s total year-to-date investments to more than $2 billion. This includes £22.2 million (or nearly $27.6 million) of the company’s international real estate investment in the U.K.
The assets are under long-term, net lease agreements, with a weighted average lease term of around 9.3 years. Around 56% of the rental revenues from acquisitions reported during the quarter came in from investment grade-rated tenants and their subsidiaries.
The company sold 27 properties for $22.5 million, with a gain on sales of $1.7 million, during the July-September period.
Realty Income exited third-quarter 2019 with cash and cash equivalents of around $236.1 million, up from $10.4 million witnessed at the end of 2018. Furthermore, the company raised $572.4 million from the sale of common stock, at a weighted average price of $74.41 per share, during the reported quarter.
Moreover, 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 Sep 30, 2019, the company had no outstanding borrowings under its revolving credit facility.
Realty Income expects full-year 2019 adjusted FFO per share of $3.29-$3.34.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Realty Income Corp. has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% 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.