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Simon Property Soars to New 52-Week High

Zacks Equity Research

Shares of Simon Property Group Inc. (SPG) touched a 52-week high of $166.30 on Friday, Apr 5, 2013, as it gained momentum from better-than-expected fourth-quarter 2012 results. The closing price of this retail real estate investment trust (:REIT) on Apr 5, 2013 was $166.23, representing a year-to-date return of 4.8%. The average trading volume over the last 3 months was 1.95 million shares.

Despite hitting its 52-week high, this Zacks Rank #2 (Buy) stock has plenty of upside left given its strong estimate revisions over the last 60 days.

Growth Drivers

Simon Property reported strong fourth-quarter 2012 results with FFO (funds from operations) per share substantially surpassing the Zacks Consensus Estimate. The company is one of the leading publicly traded retail real estate companies in the U.S. with assets in almost all retail distribution channels. Furthermore, its international presence gives it a more sustainable long-term growth prospect than its domestically focused peers.

Simon Property has one of the strongest comparable sales per square foot in the industry. Its upscale properties and their strategic locations attract a large number of high-end retailers for opening their outlets.

On Feb 4, Simon Property reported fourth-quarter 2012 FFO per share of $2.29, substantially beating the Zacks Consensus Estimate by 12 cents. This also compared favorably with the year-ago quarter’s FFO per share of $1.91.

For full year 2012, FFO stood at $2.9 billion or $7.98 per share, well ahead of $2.4 billion or $6.89 per share reported last year. The full-year earnings also surpassed the Zacks Consensus Estimate of $7.56 per share.

The results were aided by increase in rental revenue and occupancy. In addition, the company has a solid balance sheet with adequate liquidity and has announced a 21.1% year-over-year hike in its quarterly dividend rate, reflecting a hike for 6 straight quarters. Therefore, with strong fundamentals, robust growth projections and a healthy dividend yield, the stock offers an enticing upside potential going forward.

Estimate Revisions

Over the last 60 days, the Zacks Consensus Estimate for full year 2013 moved up 2.0% to $8.58 per share with 11 out of 14 estimates moving north. Also, the Zacks Consensus Estimate for full year 2014 climbed 3.6% to $9.24 per share, driven by 3 positive estimate revisions.

Of late, a number of REIT stocks achieved 52-week highs. These include Liberty Property Trust (LRY), Kimco Realty Corp. (KIM) and HCP Inc. (HCP).

Note: Funds from operations, a widely accepted and reported measure of REITs performance, are derived by adding depreciation, amortization and other non-cash expenses to net income.

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