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Is a Beat in Store for Regency (REG) This Earnings Season?

Regency Centers Corp. REG is slated to report fourth-quarter and full-year 2022 results on Feb 9 after the closing bell. While the company’s quarterly results are likely to display year-over-year revenue growth, funds from operations (FFO) per share might decline.

In the last reported quarter, this Jacksonville, FL-based retail real estate investment trust (REIT) reported a negative surprise of 1.05% in terms of NAREIT FFO per share. The results reflected healthy leasing activity and year-over-year improvement in base rent. However, same-property net operating income (NOI) fell year over year.

Over the trailing four quarters, the company’s FFO per share exceeded the Zacks Consensus Estimate on three occasions and missed the same in the remaining quarter, the average beat being 5.04%. This is depicted in the graph below:

Regency Centers Corporation Price and EPS Surprise

Regency Centers Corporation price-eps-surprise | Regency Centers Corporation Quote

Factors at Play

Per a report from CBRE Group CBRE, retail real estate markets remained robust in the fourth quarter, with resilient demand driving the retail availability rate to 4.9% after hitting a high of 6.6% in fourth-quarter 2020.

The core retail sales, excluding motor vehicles, gasoline and auto parts, climbed 7.1% from the prior-year period. The non-store retail sales, which include e-commerce, grew 11.3% year over year.

The retail asking rent improved 2.5% year over year for the second consecutive quarter to $22.78 per square foot in the fourth quarter. This was primarily driven by strong demand and limited new supply.

Retail space absorption came in at 12.7 million square feet for fourth-quarter 2022, marking the ninth consecutive quarter of positive retail absorption per the CBRE Group report.

Regency is anticipated to have benefited from the above-mentioned factors.

The increase in consumers’ preference for in-person shopping experiences following the pandemic downtime has been driving the recovery in the retail real estate industry. Amis this, the demand for REG’s high-quality open-air shopping center portfolio in the affluent suburban areas and near urban trade areas of the United States, having strong demand drivers, is likely to have aided its fourth-quarter cashflows.

Moreover, with more people moving into the suburbs due to the post-pandemic migration and the hybrid work setup, Regency’s suburban-shopping-center portfolio is expected to have benefited.

Additionally, 80% of REG’s portfolio comprises grocery-anchored neighborhood and community centers, which are necessity-driven by nature. The company also has a good tenant mix, with several industry-leading grocers.

REG’s top line is expected to have improved amid these tailwinds. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $305.2 million, indicating an increase of 2.8% from the year-ago quarter’s reported figure.

Furthermore, Regency’s solid balance-sheet position is likely to have supported its acquisition and development activities during the fourth quarter.

The company’s activities during the to-be-reported quarter were adequate to garner analysts’ confidence. The Zacks Consensus Estimate for REG’s fourth-quarter FFO per share has been revised a penny upward to 98 cents over the past two months. However, the same implies a 2.97% decline year over year.

For 2022, Regency had projected NAREIT FFO per share to lie in the range of $4.00-$4.03.

For the full year, the Zacks Consensus Estimate for FFO per share has been revised 1% upward to $4.03 over the past two months. The figure also indicates a marginal growth year over year on revenues of $1.25 billion.

Earning Whispers

Our proven model predicts a surprise in terms of FFO per share for REG this season. The combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — increases the odds of a beat. That is just the case here.

Earnings ESP: Regency has an Earnings ESP of +0.47%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: FRT currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.

Other Stocks That Warrant a Look

Here are some other stocks that are worth considering from the REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:

Federal Realty Investment Trust FRT is slated to report quarterly numbers on Feb 8. FRT has an Earnings ESP of +0.32% and carries a Zacks Rank of 3.

Public Storage PSA is scheduled to report quarterly figures on Feb 21. PSA has an Earnings ESP of +0.22 % and a Zacks Rank #3 currently.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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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