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Is a Beat in Store for Kimco Realty (KIM) in Q2 Earnings?

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Kimco Realty Corporation KIM is slated to report second-quarter results on Jul 28 before the bell. 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 Jericho, NY-based retail real estate investment trust (REIT) posted a surprise of 5.41% in terms of FFO per share. Results reflected better-than-anticipated revenues.

Kimco beat the Zacks Consensus Estimate in all the preceding four quarters, the average beat being 6.79%. This is depicted in the graph below:

Kimco Realty Corporation Price and EPS Surprise

Kimco Realty Corporation Price and EPS Surprise
Kimco Realty Corporation Price and EPS Surprise

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

Let’s see how things have shaped up before this announcement.

Factors at Play

Per a report from CBRE Group CBRE, retail real estate metrics remained strong in the second quarter even amid weak retail sales growth.

Total retail sales increased 3.8% year over year in the second quarter, lower than the five-year quarterly average of 7.0%. However, the average retail asking rent improved 2.4% year over year to $22.39 per square foot in the second quarter. It marked the highest annual growth rate since the first quarter of 2017. The retail availability rate in the second quarter hit a 10-year low of 5.1%.

Retail space absorption decreased 40% quarter over quarter and 20% year over year to 19.9 million square feet in the second quarter. Second-quarter absorptions were mainly driven by an expansion by existing retailers as new developments remained muted, per the CBRE Group report.

Kimco too is expected to benefit from its ownership of high-quality assets located in the drivable first-ring suburbs of its top major metropolitan Sunbelt and coastal markets, which offer several growth levers. Moreover, during uncertain times, the grocery component saved the grace of retail REITs, and the majority of Kimco’s annual base rent comes from grocery-anchored centers.

With a well-located and largely grocery-anchored portfolio that offers essential goods and services, this retail REIT is expected to have witnessed high occupancy and strong leasing activity, improving leasing spreads and a steady stream of revenues in the second quarter. The curbside pick-up program is anticipated to have aided KIM’s performance during the quarter under consideration.

Also, Kimco has achieved significant diversification concerning geography and tenants, which is likely to have supported the company’s cash flows during the period in discussion.

Amid these, the company’s top line is expected to have improved. The Zacks Consensus Estimate for KIM’s quarterly revenues stands at $420.67 million, calling for 45.55% growth from the prior-year quarter.

The Zacks Consensus Estimate for revenues from the rental property is currently pegged at $417 million, up from $286 million in the year-ago period.

Apart from these, the company has been making moves to bolster its financial flexibility. In the second quarter, Kimco is expected to have continued to maintain its decent balance sheet position.

The Zacks Consensus Estimate for second-quarter FFO per share has remained unrevised at 38 cents. It also suggests 11.8% growth year over year.

Here Is What Our Quantitative Model Predicts:

Our proven model predicts a surprise in terms of FFO per share for Kimco 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 the case here.

Kimco currently carries a Zacks Rank #3 and has an Earnings ESP of +2.63%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks That Warrant a Look

Here are two other stocks from the retail REIT sector — Retail Opportunity Investments Corp. ROIC and The Macerich Company MAC — that you may want to consider as our model shows that these also have the right combination of elements to report a surprise this quarter.

Retail Opportunity Investments Corp., slated to release second-quarter earnings on Jul 26, has an Earnings ESP of +2.53% and carries a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Macerich, scheduled to report quarterly numbers on Jul 28, has an Earnings ESP of +1.06% and carries a Zacks Rank of 3.

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Kimco Realty Corporation (KIM) : Free Stock Analysis Report
Macerich Company The (MAC) : Free Stock Analysis Report
Retail Opportunity Investments Corp. (ROIC) : Free Stock Analysis Report
CBRE Group, Inc. (CBRE) : Free Stock Analysis Report
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