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What's in the Cards for Tanger (SKT) This Earnings Season?

Zacks Equity Research

Tanger Factory Outlet Centers, Inc. SKT is slated to report first-quarter 2019 results on May 6, after the market closes. The company’s performance is likely to reflect a year-over-year decline in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Greensboro, NC-based retail real estate investment trust (REIT) delivered a positive surprise of 3.23% in terms of funds from operations (FFO) per share. Results reflected a better-than-expected revenue number.

Over the trailing four quarters, Tanger Outlet has surpassed estimates on each occasion, the average positive beat being 3.34%. The graph below depicts this surprise history:

Tanger Factory Outlet Centers, Inc. Price and EPS Surprise
 

Tanger Factory Outlet Centers, Inc. Price and EPS Surprise | Tanger Factory Outlet Centers, Inc. Quote

Let’s see how things are shaping up for this announcement.

Factors at Play

Tanger Outlet has been making strategic efforts to drive its mall traffic and filling vacancies with new high-quality in-demand tenants amid retail real estate market apocalypse. The company focuses on merchandising its centers, and targets popular and productive tenants. It is also focusing on helping online brands which are seeking addition of retail store components to their growth strategy. Despite the odds, these efforts are likely to help the company maintain a solid occupancy in the to-be-reported quarter.

Nonetheless, the choppy retail real estate environment might limit its growth momentum to some extent. This is because secular industry headwinds, including retailer downsizing and tenant bankruptcies, keep dampening industry fundamentals.

Recent data from Reis shows that the neighborhood and community shopping center vacancy rate remained flat in the first quarter at 10.2% but inched up from the prior year’s 10%. Additionally, the regional mall vacancy rate witnessed an uptick of 0.3% to 9.3% during the quarter. Nonetheless, national average asking rent and effective rent inched up 0.4% on a sequential basis and 1.6% year over year.

Amid these, the Zacks Consensus Estimate for first-quarter revenues is pinned at $119.9 million — indicating a year-over-year fall of 1.1%.  In the quarter under review, adjustments to rents and term might continue as the company aggressively seeks to enhance occupancy with productive tenants. Rental growth is likely to remain muted and same-center NOI might be affected amid store closures and lease modifications.

Furthermore, Tanger Outlet’s activities during the quarter were inadequate to win analysts’ confidence. Consequently, the Zacks Consensus Estimate for first-quarter FFO per share was revised downward by a cent to 57 cents, over the last 30 days. The figure also indicates a 5% decline, year over year.  

Here is what our quantitative model predicts:

Tanger Outlet does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Earnings ESP: The Earnings ESP for Tanger Outlet is -1.57%.

Zacks Rank: Tanger Outlet carries a Zacks Rank #5 (Strong Sell), currently.

This combination of Zacks Rank and Earnings ESP makes us apprehensive about any positive surprise in the quarter.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

Public Storage PSA, scheduled to release earnings on May 1, has an Earnings ESP of +1.15% and currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Mid-America Apartment Communities, Inc. MAA, slated to report first-quarter results on May 1, has an Earnings ESP of +0.29% and holds a Zacks Rank of 3.

Regency Centers Corporation REG, set to report quarterly results on May 2, has an Earnings ESP of +0.70% and carries a Zacks Rank of 3.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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