Realty Income (O) Q2 AFFO and Revenues Surpass Estimates
Realty Income Corporation’s O second-quarter 2023 adjusted funds from operations (AFFO) per share of $1.00 beat the Zacks Consensus Estimate of 99 cents by a penny. The reported figure also compared favorably with the prior-year quarter’s 97 cents.
Results reflect better-than-expected revenues in the quarter. The company benefited from expansionary effects and a healthy pipeline of opportunities globally.
Total revenues were $1.02 billion, surpassing the Zacks Consensus Estimate of $966.9 million. The top line rose 25.8% year over year.
Realty Income collected nearly 99% of contractual rent across its theater portfolio for the second-quarter 2023. During that period, the uncollected rent was primarily attributable to the unpaid contractual rent at properties leased to Cineworld, which was subsequently rejected as part of the bankruptcy process. As of Jun 30, 2023, for properties leased to Cineworld, O’s cumulative reserves totaled $31.4 million, with total receivables, net of reserves, aggregating $12.9 million.
Quarter in Detail
In the quarter, same-store rental revenues of $718.8 million from 10,685 properties under lease witnessed a rise of 2% from the prior-year period.
The portfolio occupancy of 99% as of Jun 30, 2023, was stable sequentially and improved 10 basis points (bps) year over year. In the quarter, the company achieved a rent recapture rate of 103.4% on re-leasing activity.
In the reported quarter, O invested $3.1 billion in 710 properties, and properties under development or expansion.
In the quarter, Realty Income closed on the earlier announced sale-leaseback transaction of 414 single-tenant convenience store properties with EG Group for $1.5 billion.
Balance Sheet
Realty Income exited second-quarter 2023 with $3.5 billion of liquidity. This comprised cash and cash equivalents of $253.7 million, and $3.3 billion of availability under its revolving credit facility after deducting $122.7 million in commercial paper borrowings.
Net debt to annualized pro-forma adjusted EBITDAre was 5.3X.
In the second quarter, the company raised $2.2 billion from the sale of its common stock at a weighted average price of $61.89 per share, mainly through its At-The-Market program.
2023 Guidance
Realty Income revised its outlook for 2023.
Management projects 2023 AFFO per share of $3.96-$4.01. The Zacks Consensus Estimate for the same is pegged at $4.02.
Full-year projections assume same-store rent growth of more than 1.25% and occupancy of more than 98%. O expects a full-year acquisition volume of more than $7 billion.
Realty Income Corporation Price, Consensus and EPS Surprise
Realty Income Corporation price-consensus-eps-surprise-chart | Realty Income Corporation Quote
Realty Income currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other REITs
SITE Centers Corp. SITC reported second-quarter 2023 operating funds from operations (OFFO) per share of 29 cents, beating the Zacks Consensus Estimate by a penny.
SITC's results reflect better-than-anticipated revenues on healthy leasing activity and year-over-year growth in base rent per square foot. The company also revised its outlook for 2023.
Kimco Realty Corp. KIM reported a second-quarter 2023 FFO per share of 39 cents, in line with the Zacks Consensus Estimate. The figure was only a cent lower than the year-ago quarter’s tally.
Results reflect better-than-anticipated revenues, aided by rental rate growth and a rise in occupancy levels. KIM revised its 2023 FFO per share outlook.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
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