Regency Centers Upgraded to Buy

Zacks

On Nov 29, 2013, Zacks Investment Research upgraded Regency Centers Corporation (REG) to a Zacks Rank #2 (Buy). The upgrade of this retail real estate investment trust (:REIT) came on the back of Regency’s solid third-quarter 2013 results and its strong operating fundamentals.

Why the Upgrade?

Regency has been witnessing rising funds from operations (:FFO) estimates thanks to decent third-quarter 2013 results and an enhanced guidance for full-year 2013. This retail real estate investment trust (:REIT) reported third-quarter 2013 core funds from operations (core FFO) per share of 65 cents, which beat the Zacks Consensus Estimate by 2 cents and the year-ago quarter figure by 3 cents.

The results were driven by better-than-expected growth in revenue and higher net operating income. Moreover, Regency raised its core FFO per share guidance for full-year 2013 and now expects it in the range of $2.60 – $2.63 (prior range being $2.55–$2.60).

Regency’s portfolio of shopping centers, located in high-density markets with affluent customers, is among the best in the sector. Moreover, with focus on best-in-class grocery anchors, including Whole Foods Market, Inc. (WFM), Publix, Safeway Inc. (SWY) and Trader Joe's, the portfolio drives value and mitigates operating risks. Notably, even during times of economic slump, the grocery-anchored shopping centers have earned the reputation of putting up a consistent performance.

Owing to these bullish factors, the tendency for an upward estimate revision has been obvious in recent times. Over the last 30 days, the Zacks Consensus Estimate for 2013 FFO per share rose 0.8% to $2.61. The current estimate is well within the guidance issued by the company. Moreover, for 2014, the Zacks Consensus Estimate for FFO per share moved north 0.4% to $2.68.

Additionally, the long-term earnings growth forecast for Regency is 4.84%. Hence, the favorable estimate revisions, driven by positive third-quarter results and portfolio repositioning efforts made way for the upgrade in the rank.

Other Stocks to Consider

Apart from Regency, investors interested in the retail REIT industry may consider Simon Property Group Inc. (SPG) which also carries a Zacks Rank #2 (Buy).

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.

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