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What's in Store for Regency (REG) This Earnings Season?

Regency Centers Corp. REG is slated to report first-quarter 2023 results on May 4 after the closing bell. While the company’s quarterly results might display a year-over-year decline in funds from operations (FFO) per share, revenues are expected to rise year over year.

In the last reported quarter, this Jacksonville, FL-based retail real estate investment trust’s (REIT) reported core operating EPS was 98 cents, up 6.5% year over year. The company reported a NAREIT FFO per share of $1.05, which increased from the $1.01 reported in the prior-year quarter. The Zacks Consensus Estimate was pegged at 98 cents.

Over the trailing four quarters, the company’s FFO per share exceeded the Zacks Consensus Estimate on two occasions, met on the other and missed the same in the remaining quarter, the average beat being 3.74%. This is depicted in the graph below:

Regency Centers Corporation Price and EPS Surprise

Regency Centers Corporation Price and EPS Surprise
Regency Centers Corporation Price and EPS Surprise

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

Factors to Note

Per a report from CBRE Group CBRE, the U.S. retail real estate market remained resilient in the first quarter of 2023, with the retail availability rate falling 50 basis points (bps) year over year to a new low of 4.8%.

The overall retail rent growth of 2% year over year remained above the 10-year average. Retail space absorption was at 8.6 million square feet for the first quarter of 2023, marking the 10th consecutive quarter of positive retail absorption per the CBRE Group report.

Regency is also expected to have benefited from this resiliency of the retail real estate market. 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 first-quarter cash flows.

Moreover, with more people moving to 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. Furthermore, Regency’s solid balance-sheet position is likely to have supported its acquisition and development activities in the first quarter.

However, the overall choppiness in the economy is likely to have cast a pall. Inflationary impacts on consumers and a softer economic backdrop are likely to have affected the business. Moreover, the company is not immune to the adverse impacts of inflation, interest rate increases and recessionary risks, and these might have affected its volume of leasing activity and leasing spreads.

The Zacks Consensus Estimate for first-quarter revenues is pegged at $316.35 million, suggesting an increase of 4.26% from the year-ago quarter’s reported figure.

Regency’s activities during the soon-to-be-reported quarter were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the first-quarter FFO per share has remained unchanged at $1.02 over the past month. It suggests a nearly 1% decline year over year.

Here Is What Our Quantitative Model Predicts:

Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Regency this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an FFO beat. However, that’s not the case here.

Regency currently carries a Zacks Rank #2 and has an Earnings ESP of -0.24%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are two stocks from the REIT sector — Federal Realty Investment Trust FRT and Agree Realty Corporation ADC — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.

Federal Realty is slated to report quarterly numbers on May 4. FRT has an Earnings ESP of +0.57% and carries a Zacks Rank of 3 presently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agree Realty Corporation, scheduled to report quarterly numbers on May 4, has an Earnings ESP of +0.59% and carries a Zacks Rank of 3.

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

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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Federal Realty Investment Trust (FRT) : Free Stock Analysis Report

Regency Centers Corporation (REG) : Free Stock Analysis Report

Agree Realty Corporation (ADC) : Free Stock Analysis Report

CBRE Group, Inc. (CBRE) : Free Stock Analysis Report

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