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A month has gone by since the last earnings report for Simon Property (SPG). Shares have added about 10.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Simon Property 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 drivers.
Simon Property Beats on Q1 FFO & Revenues, Raises '21 View
Simon Property’s first-quarter 2021 FFO per share of $2.48 handily exceeded the Zacks Consensus Estimate of $2.25. This performance was backed by better-than-expected top-line growth.
According to David Simon, chairman, chief executive officer and president, "Our business has substantially improved after addressing the impacts from the COVID-19 pandemic including significantly restrictive governmental orders as evidenced by our improved profitability and cash flow growth, increasing shopper traffic, increasing retailer sales, and leasing momentum across our portfolio”. He also noted that the Taubman Realty Group portfolio is seeing similar results.
The company generated revenues of $1.24 billion during the quarter, surpassing the Zacks Consensus Estimate of $1.15 billion. The retail REIT behemoth also raised the 2021 FFO per share outlook.
However, the FFO per share slipped 10.8%, while revenues declined 8.4%, year on year, reflecting the adverse impact of the pandemic.
Inside the Headline Numbers
For the U.S. Malls and Premium Outlets portfolio, occupancy was 90.8% as of Mar 31, 2021, shrinking 320 basis points, year on year. Base minimum rent per square feet was $56.07 as of Mar 31, 2021, up 0.6% year on year.
On a combined basis, domestic and international properties NOI fell 8.4% year on year, reflecting the pandemic’s impact. However, portfolio NOI, which comprises NOI from domestic properties, international properties and NOI from its investment in Taubman Realty Group, climbed 4% from the prior-year period.
Balance Sheet Position
Simon Property exited first-quarter 2021 with more than $8.4 billion of liquidity. This comprised $1.5 billion of cash on hand, including its share of joint-venture cash, as well as $6.9 billion of available capacity under the company’s revolving credit facilities, net of $500 million outstanding under the U.S. commercial paper program.
During the reported quarter, the REIT was active in both unsecured and secured credit markets. Simon Property completed a two-tranche senior notes offering totaling $1.5 billion, having a combined weighted average term of 8.4 years and a weighted average coupon rate of 1.96%. Through one of its subsidiaries, the company also accomplished a Euro senior notes offering totaling €750 million, with a 1.125% coupon rate and term of 12 years. It closed six non-recourse mortgage loans aggregating $1.3 billion (U.S. dollar equivalent), of which Simon's share is $589 million. The weighted average interest rate on these loans is 3.36%.
Simon Property raised the 2021 FFO per share guidance and now projects the same at $9.70-$9.80, up from the $9.50-$9.75 guided earlier. This suggests an increase of 13 cents per share at the mid-point.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
Currently, Simon Property has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Simon Property has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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