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Kimco Realty (KIM) Q1 FFO Beats Estimates on High Occupancy

Zacks Equity Research

Kimco Realty Corp.’s KIM first-quarter 2019 funds from operations (FFO) as adjusted were 37 cents per share, a penny ahead of the Zacks Consensus Estimate. The reported tally is in line with the year-ago quarter’s performance.

Results reflect increases in occupancy, leasing spreads and same-property net operating income (NOI). Particularly, the company registered new leasing spreads of 17.4%. This marks the 21st straight quarter in which spreads on new leases were up more than 10%. It also represents the highest quarterly increase since the third quarter of 2017.

This retail REIT posted revenues of $295 million, which surpassed the Zacks Consensus Estimate of $283.6 million. The revenue figure, however, compares unfavorably with the year-ago number of $304.1 million.

Quarter in Detail

At the end of the first quarter, pro-rata occupancy was 96%, marking an expansion of 20 basis points (bps) sequentially and the highest first quarter sequential growth level in 10 years. Pro-rata anchor and small-shop occupancy ended the quarter at 97.8% and 90.6%, respectively.

The company executed a total of 370 leases for 3 million square feet of space in the reported quarter. Pro-rata rental-rate leasing spreads increased 8.9%, with rental rates for new leases and renewals/options climbing 17.4% and 7.1%, respectively.

Same-property net operating income (NOI) grew 3.7% year over year.

Balance-Sheet Position

Kimco exited first-quarter 2019 with cash and cash equivalents of around $143.7 million, marginally up from $143.6 million recorded at the end of 2018.

Portfolio Activity

During the reported quarter, Kimco sold seven properties spanning 691,000 million square feet. The dispositions were made for $101.7 million, of which the company’s share amounted to $84.9 million.

Kimco grew its presence in high-growth markets in Arizona and California in first-quarter 2019, with a $31.2-million sale-leaseback transaction with Albertsons Companies for three grocery-anchored parcels at the company’s shopping centers.

Guidance

Kimco has affirmed its 2019 FFO projections and continues to expect FFO as adjusted per share of $1.44-$1.48. The Zacks Consensus Estimate for the same is currently pinned at $1.46.

This is based on the same-property NOI (excluding redevelopments) growth projections of 1.75-2.50% compared with the prior range of 1.5- 2.5%. Moreover, the company kept its total redevelopment and development investment projection unchanged at a range of $275-$350 million.

Dividend Update

Kimco’s board of directors announced a quarterly cash dividend of 28 cents per share. This will be paid on Jul 15, to shareholders of record as of Jul 2, 2019.

Our Viewpoint

Kimco is on track with its 2020 Vision that envisages the ownership of high-quality assets, concentrated in major metro markets which offer several growth drivers. Amid transformation in the retail landscape, the company remains well poised to navigate through mall traffic blues, with focus on service and experiential tenants, and omni-channel players.

In addition, the company is growing its presence in high-growth markets in Arizona and California in the quarter. Further, the company is making significant disposition of its assets. These dispositions are a strategic fit for long-term growth, though the company cannot bypass the dilutive impact on near-term earnings.

Kimco currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Kimco Realty Corporation Price, Consensus and EPS Surprise
 

Kimco Realty Corporation Price, Consensus and EPS Surprise | Kimco Realty Corporation Quote

We, now, look forward to the earnings releases of other REITs like Omega Healthcare Investors, Inc. OHI, Senior Housing Properties Trust SNH and Plymouth Industrial REIT, Inc. PLYM, which are slated to report their quarterly numbers in the next week.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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