Regency Centers Corporation (REG), a real estate investment trust (:REIT), reported second quarter 2012 FFO (funds from operations) of $61.3 million or 68 cents per share, compared with $55.1 million or 61 cents in the year-earlier quarter.
We cover below the results of the recent earnings announcement, as well as the subsequent analysts’ estimate revisions and the Zacks ratings for the short and long-term outlook on the stock.
Second Quarter Review
Excluding non-recurring items, recurring FFO for the reported quarter stood at $62.5 million or 69 cents per share versus $50.5 million or 56 cents in the year-ago period.
The company reported total revenues of $129.8 million in the second quarter of 2012, compared with $124.6 million in the year-ago quarter.
Read our full coverage on this earnings report: Regency Beats Estimates
Earnings Estimate Revisions – Overview
Fiscal earnings estimates have moved in both directions since the earnings release. It suggests that the analysts are cautious about the long-term performance of the company. We take a look at the earnings estimate detail.
Agreement of Estimate Revisions
In the last seven days, the earnings estimates for 2012 were increased by two out of the eight analysts covering the stock, while none decreased the same. For 2013, three out of the 12 analysts covering the stock decreased their earnings estimates and none increased it during the same time period. This indicates that the fiscal year earnings estimate revisions are a mixed bag for Regency.
Magnitude of Estimate Revisions
Earnings estimate for 2012 has increased by a penny over the last seven days to $2.47 per share. For 2013, earnings estimates have decreased from $2.60 to $2.56 during the same time period, which indicates that the analysts are pessimistic about the future performance of the company.
The long-term earnings estimate picture for Regency is neutral. With properties in high income, high-barrier to entry markets, Regency’s retail strip center portfolio is among the best in the sector, which allows it to continually perform at the top-end of its peer group. The company’s dominant anchor tenants are grocery stores, a segment that is comparatively less affected in a challenging economy. Consequently, Regency has a relatively steady source of revenue.
Regency maintains a conservative capital structure and follows a self-funding capital strategy to fund growth, which includes disposal of non-strategic assets and a continued focus on industry-leading co-investment partnership programs. This augurs well for the long-term.
However, Regency has an active development pipeline, which increases operational risks in the current credit-constrained market. It also exposes the company to rising construction costs, entitlement delays, and lease-up risk. As such, we are skeptical about the long-term earnings potential of the company
Regency currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We also maintain our long-term Neutral recommendation on the stock. One of its competitors, Kimco Realty Corporation (KIM) currently retains a Zacks #2 Rank, which translates into a short-term Buy rating.
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrated stock rating systems in use today. The Zacks Rank for stock trading in a one to three month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/educationRead the Full Research Report on KIM
More From Zacks.com
- Investment & Company Information