Will Kimco Realty (KIM) Beat Earnings Estimates in Q3?

Kimco Realty Corporation KIM is slated to report third-quarter 2015 results on Nov 4, after the market closes. Last quarter, this retail real estate investment trust (“REIT”) had delivered a 4.76% positive earnings surprise.

Of the four trailing quarters, the company beat estimates in three, delivering a positive average earnings surprise of 2.62%. The Zacks Consensus Estimate for third-quarter funds from operations (“FFO”) per share is currently 37 cents.

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

Factors to Consider

Early October, Kimco revealed that its third-quarter 2015 transaction activities have exceeded $245 million. The company is also shedding its portfolio of non-core assets and joint-venture stakes for a more streamlined business model.

Doubtlessly, Kimco’s premium properties in high-growth areas, presence of well-capitalized retailers in its tenant roaster, investments in high-quality neighborhood and community shopping centers augur well for growth. It is also expanding its small shops portfolio to attract more traffic.

In fact, cheap gasoline, low interest rates and an improving labor market have been the driving factors for the retail sector, which, in turn, boosted demand for space of the retail real estates.

Yet, near-term earnings dilution led by high disposition activity cannot be overlooked. Moreover, stiff competition from other players in the market and a rise in online shopping through the Internet, mobile phones and tablets continue to lower demand for physical stores. These might have hurt the company’s growth momentum in the to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Kimco will beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.

Zacks ESP: As both the Most Accurate estimate and the Zacks Consensus Estimate stand at 37 cents, the Earnings ESP, which represents the percentage difference between the two, is 0.00%.

Zacks Rank: The company has a Zacks Rank #3, which when combined with a zero ESP, makes a surprise prediction difficult.

Conversely, we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks That Warrant a Look

Here are some stocks in the REIT industry that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

W. P. Carey Inc. WPC has an Earnings ESP of +0.98% and a Zacks Rank #3. The company will report third-quarter results on Nov 3.

BioMed Realty Trust Inc. BMR has an Earnings ESP of +7.69% and a Zacks Rank #3. The company is slated to report third-quarter results on Nov 4.

CubeSmart CUBE has an Earnings ESP of +3.13% and a Zacks Rank #2. The company will report third-quarter results on Nov 5.

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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