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SITE Centers (SITC) Up 0.6% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
Seacor (CKH) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

A month has gone by since the last earnings report for SITE Centers (SITC). Shares have added about 0.6% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is SITE Centers due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

SITE Centers’ Q4 FFO Beats, Revenues Miss Estimates

SITE Centers posted fourth-quarter 2018 OFFO per share of 31 cents, surpassing the Zacks Consensus Estimate of 30 cents. However, the figure compared unfavorably with the prior-year figure of 56 cents. This year-over-year decline reflects the dilutive impact of the company’s spin-off of RVI, partially offset by lower interest expense.

Healthy leasing activity, rent and same-store NOI growth primarily drove the company’s performance.

However, the company generated revenues of $121.5 million in the quarter under review, missing the Zacks Consensus Estimate of $126.4 million. Further, the top-line figure came in lower than the $209.4 million recorded in the comparable period last year.

Quarter in Detail

Same-store NOI for the total portfolio on a pro-rata basis was 2.1%. During the quarter, the company, generated new leasing and renewal leasing spreads of 14% and 5.3% (pro-rata basis) for the total portfolio.

SITE Centers reported a leased rate of 92.7% as of Dec 31, 2018, compared with 93.5% (pro-rata basis) in the previous year, for the total portfolio. Notably, the bankruptcies of Toys “R” Us and Mattress Firm primarily resulted in the year-over-year decline. Annualized base rent per occupied square-foot for the total portfolio was $17.86 (pro-rata basis) as of Dec 31, 2018, up from $17.20 recorded a year ago.

Notably, SITE Centers sold 15 shopping centers and land parcels, for a total price of $733.3 million, during the reported quarter, thereby, aggregating $530.3 million at the company’s share. On the other hand, the company acquired three shopping centers for $35.1 million from unconsolidated joint ventures (JV).

In November, SITE Centers formed a JV for a 10-property portfolio, referred to as the Dividend Trust Portfolio (DTP), of which 80% stake was sold to two Chinese institutional investors. The sale proceed was used to repay the company’s outstanding debts.

During the quarter, the company repurchased 3.1 million shares for $36.3 million under its $100-million share buyback program. Subsequent to year end, it repurchased an additional 1.2 million shares for $14.1 million.

SITE Centers exited the Dec-end quarter with $11.08 million in cash compared with $92.61 million as of Dec 31, 2017.

Outlook

For 2019, the company expects OFFO per share of $1.13-$1.18. Same-store NOI for the year is projected to be 1-2%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, SITE Centers has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, SITE Centers has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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