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Regency Centers (REG) Q3 Earnings: What's in the Cards?

Zacks Equity Research

Regency Centers Corporation REG is slated to report third-quarter 2017 results on Nov 1, after the market closes. Both its revenues and funds from operations (FFO) are expected to experience solid year-over-year growth.

Last quarter, this Jacksonville, FL-based retail real estate investment trust (REIT) generated a positive surprise of 3.3%. Results were backed by robust growth in same-property net operating income (NOI).

Further, the company has a solid surprise history. It beat the Zacks Consensus Estimate in each of the trailing four quarters with an average surprise of 3.5%. This is depicted in the graph below.

Regency Centers Corporation Price and EPS Surprise

Regency Centers Corporation Price and EPS Surprise | Regency Centers Corporation Quote

Note: All EPS numbers presented in this write-up represent funds from operations (FFO) per share.

Positive Surprise is Likely

Our proven model shows that Regency has high chances of beating Q3estimates. This is because the company has the right combination of two key ingredients for a possible earnings beat — a positive Earnings ESP and Zacks Rank #3 (Hold) or better.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for Regency is +2.96%.

Zacks Rank: Regency currently carries a Zacks Rank of 3.

However, the stock has lost 9.5% year to date, underperforming the 8.9% decline witnessed by the industry it belongs to.

Factors That Might Impact Q3 Results

Regency focuses on building a premium portfolio of grocery-anchored shopping centers and neighborhood centers. Such centers are usually necessity driven and drive a dependable traffic. Also, the company’s solid experience in the retail real estate industry with well-known grocers as tenants and its preference of long-term leases over the short term ones will likely help it ride the growth trajectory in the to-be-reported quarter.

Regency’s recent merger with Equity One helped the company in creating a high-quality portfolio of 429 properties which were mainly grocery anchored. In second quarter, the company realized $27 million of G&A synergies. In the third-quarter too, we anticipate this merger to drive robust growth in its rental rates and occupancy levels.

With online retailers venturing into the grocery business, shift of sales from the brick and mortar space to online stores is emerging as a pressing concern. This is adversely affecting the retail tenants’ sales, leading them to reconsider their footprint and opt for store closures, thereby resulting in lesser demand for retail real estate space. In fact, amid this environment, same-property net operating income is estimated to be moderate in the third quarter.

Regency’s activities during the quarter were inadequate to gain analysts’ confidence. Consequently, the Zacks Consensus Estimate for Q3 FFO remained unchanged at 91 cents over the past month.

Stocks That Warrant a Look

Here are a few stocks in the REIT space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

EPR Properties EPR,slated to release third-quarter earnings on Nov 8, has an Earnings ESP of +0.93% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BostonProperties, Inc. BXP,scheduled to report its numbers on Nov 1, has an Earnings ESP of +0.5% and a Zacks Rank of 3.

Paramount Group, Inc. PGRE, set to release third-quarter figures on Nov 6, has an Earnings ESP of +3.77 and a Zacks Rank of 3.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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