Kimco Realty's (KIM) Q3 FFO & Revenues Surpass Estimates

Kimco Realty Corp.’s KIM third-quarter 2019 funds from operations (FFO) as adjusted, excluding the impact of transactional income and charges, came in at 37 cents per share, surpassing the Zacks Consensus Estimate by a whisker. The reported tally comes in a penny higher than the year-ago quarter’s FFO as adjusted of 36 cents per share.

Results reflect increase in portfolio occupancy reaching an all-time high level, healthy leasing spreads on new lease and positive same-property net operating income (NOI). Particularly, the company registered new leasing spreads of 27.2%. This marks the 23rd straight quarter in which spreads on new leases improved in double digits.

The retail REIT generated revenues of around $282.9 million, beating the Zacks Consensus Estimate of $282.6 million. The revenue figure, however, compares unfavorably with the year-ago number of $283.1 million.

Quarter in Detail

At the end of the third quarter, the company reached its all-time high level of pro-rata occupancy at 96.4%. This marked an expansion of 20 basis points (bps) on a sequential basis and 60 bps year on year.

Pro-rata anchor occupancy ended the quarter at 98.7%, denoting 50-basis point sequential growth, and a 110-basis point expansion, year over year. This indicates an all-time high level for Kimco.

Pro-rata small-shop occupancy ended the third quarter at 89.9%. This marks a year-over-year decline of 90 bps, sequentially the figure shrunk 60 bps.

Pro-rata rental-rate leasing spreads increased 8.1%, with rental rates for new leases and renewals/options climbing 27.2% and 4.6%, respectively.

Same-property NOI grew 2.2% year over year.

Balance-Sheet Position

Kimco exited third-quarter 2019 with cash and cash equivalents of $141.3 million, down from the $143.6 million recorded at the end of 2018.

Further, during the quarter, the company established a new at-the-market (ATM) equity offering program to sell shares of its common stock, with aggregate gross sales price of up to $500 million.

Portfolio Activity

During the reported quarter, Kimco sold eight properties and two land parcels, aggregating 1 million square feet of space. The dispositions were made for $166.7 million, of which the company’s share amounted to $70.9 million.

Guidance

Kimco has revised its 2019 FFO projections, and estimates the FFO as adjusted per share to be in the $1.46-$1.47 range as compared with the prior projection of $1.44-$1.48. The Zacks Consensus Estimate for the same is currently pinned at $1.46.

The company also updated its operational assumption for same-property NOI and now forecasts it, excluding redevelopments, in the range of 2.50-2.80% compared with the prior outlook of 2-2.70%.

However, the company kept its net disposition guidance unchanged at $200-$300 million, with a blended disposition cap rates of 7.25-7.75%, and the combined redevelopment and development investment projection unaffected in the band of $275-$350 million.

Dividend Update

Kimco’s board of directors announced a quarterly cash dividend of 28 cents per share. This will be paid on Jan 15, to shareholders of record as of Jan 2, 2020.

Conclusion

Kimco’s premium properties in the upscale and high barrier to entry markets have likely enabled the company to witness strong leasing and occupancy in its portfolio. Furthermore, the company’s 2020 Vision that envisages the ownership of high-quality assets, concentrated in major metro markets, has also improved its portfolio quality.

Amid transformation in the retail landscape, these strategic efforts to navigate mall traffic blues are encouraging.

Kimco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Kimco Realty Corporation Price, Consensus and EPS Surprise

Kimco Realty Corporation Price, Consensus and EPS Surprise

Kimco Realty Corporation price-consensus-eps-surprise-chart | Kimco Realty Corporation Quote

We now look forward to the earnings releases of other REITs like Alexandria Real Estate Equities ARE, Vornado Realty Trust VNO and Welltower Inc. WELL. All three companies are scheduled to release their quarterly numbers on Oct 28.

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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