Here's How Regency (REG) Is Placed Ahead of Q3 Earnings

Regency Centers Corp. REG is slated to report third-quarter 2022 results on Nov 3 after the closing bell. The company’s quarterly results might display a year-over-year decline in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Jacksonville, FL-based retail real estate investment trust (REIT) reported a surprise of 5.26% in terms of NAREIT FFO per share. The quarterly results reflected better-than-anticipated top-line growth and solid leasing activity.

Over the trailing four quarters, the company’s FFO per share exceeded the Zacks Consensus Estimate on three occasions and missed the same in the remaining quarter, the average beat being 4.80%. This is depicted in the graph below:

Regency Centers Corporation Price and EPS Surprise

Regency Centers Corporation Price and EPS Surprise

Regency Centers Corporation price-eps-surprise | Regency Centers Corporation Quote

Factors to Note

Per a report from CBRE Group CBRE, retail metrics remained positive in the third quarter, given the onset of the holiday season. The core retail sales, excluding gasoline and automobiles, climbed 8.2% from the prior-year period. The overall retail availability rate fell nearly a full percentage point year over year to 5% in the third quarter. The average asking rent increased by 2.5% year over year to $22.55 per square foot in the third quarter.

The absorption of 14.3 million square feet in the third quarter was less than half the level a year ago, but it was 8% higher than the third-quarter 2019 level. Also, new deliveries aggregated 25.1 million square feet over the past 12 months and marked a record low, per the CBRE Group report.

Regency is also expected to have benefited from the recovery in the retail real estate market. It has a high-quality open-air shopping center portfolio with 80% grocery-anchored neighborhood and community centers. The properties are mainly situated in affluent suburban areas and near urban trade areas where consumers have high spending power, enabling it to attract top grocers and retailers.

Regency also maintains a high-quality tenant roster with numerous industry-leading grocers.

However, the overall choppiness in the economy is likely to have cast a pall. Inflationary impacts on consumers and a softer economic backdrop are likely to have affected the business.

Moreover, the company is not immune to the adverse impacts of inflation, interest rate increases and recessionary risks, and these might have affected its volume of leasing activity and leasing spreads. Also, expenses are likely to have remained elevated.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $298.7 million, suggesting a decrease of 2.82% from the year-ago quarter’s reported figure.

Regency’s activities during the soon-to-be-reported quarter were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the third-quarter FFO per share has been revised a cent downward to 95 cents over the past month. It also suggests a 1.04% decline year over year.

Here Is What Our Quantitative Model Predicts:

Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Regency this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an FFO beat. However, that’s not the case here.

Regency currently carries a Zacks Rank #2 and has an Earnings ESP of -0.45%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are two stocks from the broader REIT sector — Host Hotels & Resorts, Inc. HST and Park Hotels & Resorts Inc. PK — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.

Host Hotels & Resorts, scheduled to report quarterly numbers on Nov 2, currently has an Earnings ESP of +0.71% and carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Park Hotels & Resorts, slated to release quarterly numbers on Nov 2, has an Earnings ESP of +2.50% and carries a Zacks Rank of 3 at present.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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

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