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Simon Property Upped to Buy Again

Zacks Equity Research

On Nov 29, Zacks Investment Research upgraded Simon Property Group, Inc. (SPG) to a Zacks Rank #2 (Buy). The upgrade of this retail real estate investment trust (:REIT) came on the back of strong third-quarter 2013 results and guidance increase. Also, the company’s recent dividend hike and improving fundamentals added to the bliss.

Why the Upgrade?

Keeping its winning streak alive, Simon Property came up with a solid operating performance during the third quarter, with funds from operations (:FFO) of $2.21 per share comfortably edging past the Zacks Consensus estimates by 5 cents and year-over-year figure by 22 cents. Quarterly FFO per share improved 11.1% year over year, primarily driven by an increase in revenues and occupancy rate.

In particular, significant portfolio restructuring activity has been driving Simon Property to enhance its footprint globally. It has been active in capitalizing on growth opportunities in some of the top global markets, with focus on enhancing its Premium Outlets portfolio. Consequently, Simon Property opened 3 premium outlets –Toronto Premium Outlets (Canada), Busan Premium Outlets (Korea) and St. Louis Premium Outlets (Missouri) – in third-quarter 2013.

Prompted by its strong fundamentals, the company raised its FFO growth outlook for the third time this year. Simon Property also hiked its quarterly dividend payout by 4.3%.

As a result, analysts became more positive on the stock’s future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that rose 0.3% to $8.79 for 2013 and 0.3% to $9.48 per share for 2014 in the past 30 days.

Additionally, the growth forecast for 2013 FFO per share of the company is 10.14%. Hence, the favorable estimate revisions, driven by robust third-quarter results and expansion efforts made way for the rank upgrade.

Other Stocks to Consider

Other players in REIT-Equity Trust – Retail industry, which look attractive at current levels, include Regency Centers Corporation (REG), American Assets Trust, Inc. (AAT) and Retail Properties of America, Inc. (RPAI), all carrying a Zacks Rank #2 (Buy).

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

Read the Full Research Report on SPG
Read the Full Research Report on REG
Read the Full Research Report on AAT
Read the Full Research Report on RPAI

Zacks Investment Research