Yahoo Finance What's in the Offing for Realty Income (O) in Q1 Earnings?
Realty Income Corp. O is slated to report first-quarter 2024 results on May 6 after market close. The company’s quarterly results are likely to display year-over-year growth in revenues and funds from operations (FFO) per share.
In the last reported quarter, this monthly dividend-paying real estate investment trust (REIT) reported adjusted funds from operations (AFFO) per share of $1.01, which missed the Zacks Consensus Estimate by a penny. Results reflected a rise in interest expenses. However, the company reported year-over-year growth in the top line. O benefited from expansionary effects and a healthy pipeline of opportunities globally.
Over the trailing four quarters, the company’s AFFO per share surpassed the Zacks Consensus Estimate on two occasions for as many misses, the average negative surprise being 0.47%. This is depicted in the graph below:
Realty Income Corporation Price and EPS Surprise
Realty Income Corporation price-eps-surprise | Realty Income Corporation Quote
Factors to Note
US Retail Real Estate Market in Q1
Per a report from CBRE Group CBRE, amid slowing retail activity, U.S. net absorption fell in the first quarter. The U.S. overall retail availability rate remained at 4.7%, even though supply additions surpassed net absorption in the first quarter. The quarter witnessed a significant decline in net absorption, which fell to 3.7 million square feet in the first quarter from 12.5 million square feet in the prior quarter and was also less than half of the 10-year quarterly average. Store closures mainly led to this substantial decline.
Amid high construction costs, new retail development was at a low level. Completions aggregated 5.8 million square feet, down 32% from the prior quarter. Across all retail formats, deliveries of new centers remained low in the first quarter, per the CBRE report.
Asking rent growth remained strong in the first quarter, with the average asking rent increasing 0.9% quarter over quarter and 2.7% year over year to $24.07 per square foot. The report noted that high-growth secondary and tertiary markets carried on performing well.
O’s Portfolio & Projections
Realty Income’s portfolio comprises a significant portion of top industries selling essential goods and services. The company enjoys a diversified tenant base with respect to tenant, industry, geography and property type. It derives most of its annualized retail contractual rental revenues from tenants with a service, non-discretionary and/or low-price-point component to their business. This is likely to have supported stable rental revenue generation in the first quarter, boosting the top line.
Further, given Realty Income’s solid underlying real estate quality and record of prudent underwriting at acquisitions, occupancy at the company’s properties is anticipated to have remained high.
The Zacks Consensus Estimate for quarterly revenues is pegged at $1.19 billion, which suggests a 26.15% increase from the year-ago quarter’s reported figure. The consensus mark for rental revenues (excluding reimbursable) is pegged at $1.16 billion, up from $963.14 million recorded in the prior quarter and $865.71 million in the year-ago quarter.
Realty Income is anticipated to have maintained a robust balance sheet position in the quarter, supporting its growth endeavors.
However, higher interest expenses during the quarter are likely to have been a spoilsport.
Realty Income’s activities during the soon-to-be-reported quarter were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the first-quarter FFO per share of $1.03 has not been revised over the past month. However, it suggests a 5.1% increase year over year.
Q1 Update
In January 2024, Realty Income completed its all-stock merger transaction with Spirit Realty Capital, Inc. The transaction is immediately accretive on a leverage-neutral basis and adds to Realty Income's size, scale and diversification, enabling it to expand its scope for future growth.
In February 2024, Realty Income announced a sale-leaseback transaction for 82 retail properties leased to affiliates of Decathlon SE, a global sports company and sporting goods retailer. The portfolio comprises properties located in Germany, France, Spain, Italy and Portugal.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for Realty Income this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
Realty Income currently carries a Zacks Rank of 4 (Sell) and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the broader REIT sector — Medical Properties Trust MPW and Peakstone Realty Trust PKST — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
Medical Properties, slated to release quarterly numbers on May 9, has an Earnings ESP of +9.15% and carries a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Peakstone Realty Trust, scheduled to report quarterly numbers on May 7, has an Earnings ESP of +8.28% and sports a Zacks Rank of 1.
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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Realty Income Corporation (O) : Free Stock Analysis Report
Medical Properties Trust, Inc. (MPW) : Free Stock Analysis Report
CBRE Group, Inc. (CBRE) : Free Stock Analysis Report
Peakstone Realty Trust (PKST) : Free Stock Analysis Report
