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The Zacks Analyst Blog Highlights: Endo Health Solutions, Kimco Realty, Kroger, Bed Bath & Beyond and Regency Centers

Zacks Equity Research

For Immediate Release

Chicago, IL – October 21, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Endo Health Solutions ( ENDP- Free Report), Kimco Realty Corp. ( KIM- Free Report), The Kroger Co. ( KR- Free Report), Bed Bath & Beyond Inc. ( BBBY- Free Report) and Regency Centers Corporation ( REG- Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free .

Here are highlights from Friday’s Analyst Blog:

Endo Health Upped to Outperform

On Oct 16, we upgraded our recommendation on Endo Health Solutions ( ENDP- Free Report) to Outperform from Neutral. We are impressed by the company’s strategy to cut costs and optimize resources in order to maximize long-term growth potential.

Why Outperform?

Endo Health reported higher-than-expected earnings in the second quarter of 2013 aided by lower costs. The company raised its earnings guidance for 2013 in the range of $4.25-$4.55 (old guidance: $4.10–$4.40 per share). Endo Health also reported revenues higher than the Zacks Consensus Estimate.

With a major part of its top line likely to be exposed to generic competition in the next few years, the company is looking towards cost-cutting initiatives to drive the bottom line. The company is seeking to lessen the impact of the genericization of key products by reducing its cost structure. In Jun 2013, Endo Health announced that it will trim its work force by approximately 15%. The move is expected to result in annual savings of approximately $325 million. The company expects to realize $150 million savings by Dec 31, 2013. We are also positive on Endo Health’s move to sell its struggling anatomical pathology business.

We are impressed by Endo Health’s growth-by-acquisition strategy.  In Aug 2013, Endo Health announced its intention to acquire privately-held generics company Boca Pharmacal for $225 million in cash. The decision to buy Boca Pharmacal is a smart move by Endo Health as it prepares to combat the decline in revenues due to genericization of its key painkillers. In Mar 2012, Endo Health joined hands with Mersana Therapeutics Inc. for the development of next-generation antibody-drug conjugates. Moreover, in Jan 2012, Endo Health inked a global license and development agreement with BioDelivery Sciences International regarding the latter’s pain candidate BEMA buprenorphine.

The company had made other major acquisitions over the past few years. We believe that these acquisitions/deals are steps in the right direction and would help counter the generic threat faced by Endo Health.

The earnings beat in the second quarter of 2013 was the fourth consecutive one at Endo Health. The third-quarter Earnings ESP for the company is +0.89%. This, along with its Zacks Rank #1 (Strong Buy), makes us confident of a positive earnings surprise in the third quarter of 2013. Moreover, the Zacks Consensus Estimate for 2013 advanced 57.6% to $4.59 per share over the last 90 days.

Kimco Provides Q3 Transaction Update

One of the leading retail real estate investment trusts (:REIT), Kimco Realty Corp. ( KIM- Free Report), disclosed its third-quarter 2013 transaction activities. During the quarter, the company acquired assets worth $37.6 million, while its divestitures amounted to about $854.2 million.

Q3 Transactions in Details

During the third-quarter, Kimco bought two U.S. assets – Village at Highlands Ranch II and ElmsfordCenter – in Colorado and New York, respectively. Littleton-based Village at Highlands Ranch II is part of an interrelated retail complex that is occupied by the area’s dominant grocer, King Soopers – a supermarket brand of The Kroger Co. ( KR- Free Report). The mortgage-free retail center positioned in a prosperous Denver suburb was bought for $14.6 million.

On the other hand, Elmsford Center that is located in the New York metro suburb was acquired for $23 million. The power center is anchored by Bed Bath & Beyond Inc. ( BBBY- Free Report) and Sports Authority. Both the assets are positioned in upscale communities, with a three-mile average household income of $121,000 and $123,000, respectively.

In addition, Kimco and its JV partner – American Industries – divested their stake in 84 Mexican industrial assets for $603.5 million. The properties were sold to Terrafina – a Mexican REIT. Moreover, Kimco offloaded a 4-property Mexican shopping center portfolio to its local operating partner, Planigrupo, for $84 million (1.1 billion Mexican pesos).

In addition, Kimco sold its 43% stake in a Guadalajara, Mexico-based asset Centro Sur shopping center for $41 million (523 million Mexican pesos). Also, the company divested its 50% stake in a Chile-based 9-property shopping center portfolio to its local operating partner for $50.2 million (25.3 billion Chilean pesos). Additionally, Kimco had vended 8 assets of its U.S. shopping center portfolio for $75.5 million.
 
Subsequent to Quarter-end Events

Following the third quarter-end, Kimco bought 2 shopping centers – Northridge Shopping Center (Arvada, Colo.) and Five Forks Crossing (Lilburn, Ga.) – for a total price $29.6 million. Notably, since 2010, Kimco has acquired 70 properties in highly affluent areas of the U.S. for $1.7 billion.

Also, Kimco disposed its 31.7% interest in a Las Palmas, Texas-based asset to its joint venture partners for $99.9 million. With this, since the initiation of the U.S. non-strategic retail disposition program in 2010, Kimco has sold 130 properties for $1.1 billion. Of this, Kimco’s share of the proceeds was $615.1 million.

Our Take

Kimco’s successful efforts to improve its core portfolio through the divestiture of non-strategic assets and acquisition of high-quality properties are commendable. This augurs well for its earnings going forward as the properties are positioned mostly in high-income, high-growth areas. Moreover, the high credit tenant retention limits the downside risk and provides a long-term steady source of income for the company.

Kimco is scheduled to release third-quarter 2013 results on Oct 29, 2013, after the closing bell. The Zacks Consensus Estimate for third-quarter funds from operations (:FFO) is currently pegged at 33 cents per share, representing a year-over-year increase of 6.24%.

Kimco currently carries a Zacks Rank #2 (Buy). Another retail REIT, Regency Centers Corporation ( REG- Free Report) is performing well and has the same rank as Kimco.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
 
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