Yahoo Finance Kimco (KIM) Q1 FFO Beats Estimates, Guidance Raised - Analyst Blog
Retail real estate investment trust (“REIT”) Kimco Realty Corporation’s KIM first-quarter 2015 funds from operations (“FFO”) per share, as adjusted, came in at 36 cents, a penny above the Zacks Consensus Estimate and 2 cents above the prior-year quarter figure. Results reflect growth in revenues and U.S. same-property net operating income (“NOI”).
Total revenue increased 24.2% year over year to $283.5 million, surpassing the Zacks Consensus Estimate of $262 million.
Quarter in Details
At quarter-end, pro-rata occupancy in the U.S. and combined portfolios (including Canada and Latin America) stood at 95.7%, denoting year-over-year increases of 100 basis points (bps) and 120 bps, respectively.
In the U.S. shopping center portfolio, pro-rata occupancy for anchor space (10,000 square feet and greater) was 98.2%, reflecting an uptick of 60 bps year over year; while pro-rata occupancy for small shop space rose 260 bps to 88.2% over the same time frame.
Same-property NOI in the U.S. portfolio climbed 3.2% from the year-ago period. Further, U.S. pro-rata rental-rate leasing spreads moved north 10.1%, with rental rates for new leases rising 19.1% and renewals/options advancing 8.1%.
Kimco exited first-quarter 2015 with nearly $221.0 million, up from $187.3 million at prior-year end.
Portfolio Activity
In the reported quarter, Kimco acquired 41 high quality shopping centers and 4 adjacent parcels at existing Kimco Tier 1 centers, aggregating around 6.0 million square feet. The assets were purchased for around $1.5 billion, with $995.3 million being Kimco’s pro-rata share of the purchase price. On the other hand, dispositions aggregated $302.4 million, with Kimco’s pro-rata share of dispositions being $187.4 million for the quarter (read more: Kimco Reveals $1.7 Billion of Deals in 1Q15: Time to Hold?).
Notably, subsequent to the quarter end, Kimco sold 6.4 million shares of SUPERVALU INC. SVU common stock. This resulted in a gain of around $32.4 million, which the company will recognize in second quarter of 2015.
Guidance Raised
Kimco raised its full-year 2015 guidance range. The company now expects adjusted FFO per share in the range of $1.42–$1.45, as against $1.40–$1.44 guided earlier. However, this range lies below the Zacks Consensus Estimate of $1.46 per share.
The company’s outlook is based on expectations of the U.S. portfolio occupancy growth of 25–50 bps and same-property NOI increase in the range of 3.0–3.5%.
Dividend Update
Kimco’s board of directors announced a quarterly cash dividend of 24 cents per share on its common stock. The dividend will be paid on Jul 15, 2015 to shareholders of record on Jul 6.
Our Viewpoint
Going forward, solid demand for Kimco’s properties, its portfolio-transformation initiatives and easy access to capital bode well. Further, the company is expanding its small shops portfolio to attract more traffic. Nevertheless, near-term earnings dilution led by high disposition activity and an anticipated rise in the interest rate in the medium term remain as concerns for this stock.
Kimco currently has a Zacks Rank #3 (Hold). Investors interested in retail REITs may consider stocks like EPR Properties EPR and Excel Trust, Inc. EXL. Both these stocks hold a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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