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Regency Centers (REG) Up 29.9% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Regency Centers (REG). Shares have added about 29.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Regency 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 the most recent earnings report in order to get a better handle on the important catalysts.

Regency Centers Q1 FFO Meets Estimates, Revenues Miss

Regency’s first-quarter 2020 NAREIT FFO per share of 98 cents were in line with the Zacks Consensus Estimate. The reported figure remained unchanged from the prior-year quarter’s tally.

Decent leasing activities and rent spreads aided performance. However, results indicate declines in revenues and same-property net operating income (NOI). In fact, same-property NOI was impacted by known bankruptcy move-outs and a higher uncollectible lease income due to the COVID-19 pandemic.

Notably, 416 properties of the company were operational in the first quarter amid the virus outbreak. However, due to social distancing mandates and the COVID-19 outbreak-related restrictions, around 40% of Regency’s tenants were closed (based on pro-rata annual base rent) as of April end. Also, through May 5, 2020, 62% of April 2020 pro-rata base rents were collected.

Total revenues in the quarter were $283.7 million, lagging the Zacks Consensus Estimate of $288.1 million. Further, the top line declined marginally from the year-ago figure of $286.3 million.

Inside the Headlines

During the reported quarter, Regency executed 1.5 million square feet of comparable new and renewal leases, with blended rent spreads for the March-end quarter of 4.1%.

As of Mar 31, 2020, the company’s wholly-owned portfolio along with its pro-rata shares of co-investment partnerships was 94.5% leased. Its same-property portfolio was 95% leased. Same-property NOI, excluding termination fees, edged down 0.7% on a year-over-year basis.

Portfolio Activity

During the reported quarter, the company sold two shopping centers for $98.4 million.

Further, in January 2020, it closed the acquisition of additional interests in two properties for $60.5 million.

Liquidity Update

Regency’s liquidity totaled $1.3 billion as of Mar 31, 2020, consisting of cash balance of $735 million and $545 million available under its revolving credit facility. The company has no unsecured debt maturities until 2022.

During the quarter, in its efforts to provide financial flexibility and strengthen its balance-sheet position amid the ongoing pandemic, the company settled its 2019 forward equity sales under its ATM program, generating $125.8 million in net proceeds. It also drew an additional $500 million from its existing $1.25-billion revolving credit facility.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

Currently, Regency Centers has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, 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 F. 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 these revisions indicates a downward shift. It's no surprise Regency Centers has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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