Back to top

Will Simon Property Miss in 4Q?

Read MoreHide Full Article

One of the leading retail real estate investment trust (REIT), Simon Property Group Inc. (SPG - Free Report) prepares to release its fourth-quarter 2012 results before the opening bell on Monday, Feb 4.

In the last quarter, it delivered a positive earnings surprise of 3.65% on the back of an increase in average rent and occupancy. This represented the fourth straight quarter of positive earnings surprise. Let’s see how things are shaping up for the company prior to the announcement.

Factors to Consider

Simon Property boasts a strong portfolio of assets and enjoys competitive advantage through product and geographical diversification. The significant acquisitions and partnerships have further strengthened the company’s presence in the core U.S. markets. Benefiting from this, the company has performed favorably in the last year. In the last quarter the company signed joint venture deals with Tanger Factory Outlet Centers Inc (SKT - Free Report) and Institutional Mall Investors (‘IMI’) for acquisition and development purposes.

However, Simon Property’s possessions consist primarily of community shopping centers, making its performance dependent on general economic conditions of the market for retail space. In addition, the momentous development pipeline, which increases operational risks in the current credit-constrained market, is also a matter of concern.

Earnings Whispers

Our proven model does not conclusively shows that Simon Property is likely to beat the Zacks Consensus Estimate in the upcoming quarter. To beat the estimate, a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3. However, this is not the case here due to the following reasons:

Negative Zacks ESP: The company’s Most Accurate Estimate stands at $2.16, while the Zacks Consensus is pegged slightly higher at $2.17. This results in an Earnings ESP of -0.46%.

Zacks Rank #2 (Buy): Simon Property’s Zacks Rank of 2, however, increases the predictive power of ESP. Nevertheless, we need to have a positive ESP as well to be confident about an earnings surprise call.

Other Stocks to Consider

Here are some other REITs you may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:

Ventas Inc. (VTR - Free Report) has Earnings ESP of +2.06% and Zacks Rank #2. The company is scheduled to report its earnings on Feb 15 before the opening bell.

Equity Residential (EQR - Free Report) has Earnings ESP of +12.00% and Zacks Rank #3 (Hold). The company is scheduled to report its earnings on Feb 5 after the closing bell.

More from Zacks Analyst Blog

You May Like