RE vs. RNR: Which Stock Should Value Investors Buy Now?
It has been about a month since the last earnings report for Regency Centers Corporation REG. Shares have added about 2.3% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is REG 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 catalysts.
Regency Centers Q4 FFO Meets Estimates, Revenues Up
Regency’s fourth-quarter 2017 core FFO per share of 92 cents came in line with the Zacks Consensus Estimate. Results compared favorably with 86 cents reported in the year-ago quarter.
The company’s quarterly results reflect growth in same-property NOI and strong leasing activity during the quarter.
Adjusted revenues for the quarter came in at $257.9 million, marginally outpacing the Zacks Consensus Estimate of $257.6 million. Further, the figure came in higher than the year-ago tally of $153 million.
For full-year 2017, Regency came up with core FFO per share of $3.69, ahead of the prior-year tally of $3.29. Adjusted revenues for the full-year came in at $958.17 million, significantly higher than the year-ago tally of $589 million.
Inside the Headlines
During the reported quarter, Regency executed 1.8 million square feet of new and renewal leases on a comparable basis, leading to 6% blended rent spreads. Rent spreads on new leases came in at 2.2%, while the same for renewal leases was 7.1%.
New leasing corresponded to roughly 443,000 square feet, with Anchors’ representation of about 60% of new activity, which compares favorably with an average of 30%, recorded in the year-ago quarter.
As of Dec 31, 2017, the company’s wholly-owned portfolio, including pro-rata shares of co-investment partnerships, was 95.5% leased. Moreover, the same-property portfolio was 96.3% leased, reflecting an expansion of 30 basis points (bps) sequentially and year over year, when adjusted for the present same property pool.
In the same-property asset portfolio, small shops were 92.5% leased, reflecting an uptick of 10 bps sequentially and 40 bps year over year. Further, within the same-property portfolio, Anchors were 98.6% leased, reflecting growth of 40 bps sequentially and year over year, when adjusted for the present same property pool.
In addition, Regency’s same-property NOI as adjusted, excluding termination fees, climbed 2.7% on a year-over-year basis.
Regency’s cash and cash equivalents were $49.4 million at the end of fourth-quarter 2017, up from $17.9 million recorded at the end of 2016. The company’s total outstanding debt was $3.6 billion, up from $1.6 billion witnessed at the end of the previous year.
Notable Portfolio Activity
During the quarter under review, the company sold five shopping centers, for a total value of $103 million. Regency closed acquisitions of two properties for about $150 million during the quarter.
As the fourth quarter ended, the company had 23 properties in development or under-development with a total investment of around $544 million.
Regency expects the operating FFO per share to be in the range of $3.48-$3.54, this reflects no change from the guidance issued on Jan 11, 2018. The company expects 2.25-3.25% growth in same property net operating income, excluding termination fees. Acquisitions and dispositions are anticipated to be approximately $150 million each.
Capital Market Activities
The company issued 1.25 million shares of the common stock and received approximately net proceeds of $89.1 million after making adjustments for interest, dividends and the underwriters’ discount.
Regency’s board authorized share repurchase of its common stock for up to $250 million by Feb 6, 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
Regency Centers Corporation Price and Consensus
Regency Centers Corporation Price and Consensus | Regency Centers Corporation Quote
At this time, REG has an average Growth Score of C. Its Momentum is doing a bit better with a B. The stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Our style scores indicate that the stock is more suitable for momentum investors than growth investors.
Estimates have been trending upward for the stock and the magnitude of this revision looks promising. Notably, REG has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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