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DDR's Q2 FFO Surpasses Estimates, Up Y/Y, Liquidity Down

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DDR Corp.’s DDR second-quarter 2018 operating funds from operations (FFO) per share of 49 cents surpassed the Zacks Consensus Estimate of 47 cents. Moreover, the figure compares favorably with the prior-year quarter figure of 59 cents.

DDR completed the spin-off of RVI that enabled it to hold a portfolio of high-growth 78 assets. However, spin-off transaction costs amounting to $31.4 million impacted its results.

The company generated revenues of $204.3 million for the second quarter, surpassing the Zacks Consensus Estimate of $200.5 million. However, the top line fell short of $227.4 million recorded in the year-ago quarter.

DDR Corp. Price, Consensus and EPS Surprise
 

DDR Corp. Price, Consensus and EPS Surprise | DDR Corp. Quote

Quarter in Detail

Same-store net operating income (NOI) for the total portfolio on a pro-rata basis was 1.4%. Further, the company, on a pro-rata basis for the total portfolio for the quarter, generated new leasing and renewal leasing spreads of 24.7% and 5.7%, respectively, in the second quarter.

DDR reported a leased rate of 93.1% as of Jun 30, 2018, compared with 93.2% in the prior-year quarter, on a pro-rata basis for the total portfolio.

Annualized base rent per occupied square-foot for the total portfolio was $17.36 on a pro-rata basis as of Jun 30, 2018, up from $17.08 recorded a year ago.

Notably, DDR sold 17 shopping centers and land parcels for a total price of $421.1 million during the quarter under review, thereby aggregating $202.7 million at DDR's share.

DDR exited the second quarter with $32.07 million in cash compared with $92.61 million as of Dec 31, 2017.

Outlook

DDR reiterated its previously-issued guidance.

For third-quarter 2018, the company continues to expect Operating FFO to be at least 30 cents. Net income attributable to shareholders is expected to be four to six cents per share.

Bottom Line

DDR witnessed a decline in minimum rents and percentage rents year over year. The choppy retail real estate environment is most likely limiting growth in rents. In the near term as well, e-retail is anticipated to limit demand for space, with shift in customers’ shopping preferences toward online channels.

Further, in a bid to streamline its business, the company executed a major spin-off transaction, which has impacted its performance as well. In fact, it incurred heavy transaction cost that hindered profits.

DDR carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Vornado Realty Trust VNO, Boston Properties BXP and Extra Space Storage EXR. While Vornado will report Q2 figures on Jul 30, the other two companies are scheduled to release their quarterly numbers on Jul 31.

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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