Why Is Kimco Realty (KIM) Up 9.7% Since Last Earnings Report?

It has been about a month since the last earnings report for Kimco Realty (KIM). Shares have added about 9.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Kimco Realty due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Kimco Realty's Q4 FFO and Revenues Beat Estimates

Kimco’s fourth-quarter 2020 NAREIT FFO per share came in at 31 cents, surpassing the Zacks Consensus Estimate of 30 cents. Results reflect better-than-anticipated revenue numbers.

Remarkably, the retail REIT generated revenues of $269.4 million, exceeding the consensus mark of $267.8 million.

According to Conor Flynn, Kimco’s chief executive officer, “During the fourth quarter our rent collections remained strong, our leasing volume reached pre-pandemic levels and we continued our efforts to help tenants overcome the impact of COVID-19.”

With a well-located and largely grocery-anchored portfolio that offers essential goods and services, rent-collection figures remain healthy. At the end of January, all of the company’s shopping centers were open and operational with 97% of tenants open, based on the annualized base rent, including some that are operating on a limited basis. Moreover, the company collected 92% of total pro-rata base rents billed during the fourth quarter and later collected 91% for the month of January.

Nonetheless, the FFO per share comes in lower than the year-ago quarter’s 36 cents. Also, revenues declined 9% year on year. Results underline a fall in same-property net operating income (NOI), mainly affected by a charge for potentially uncollectible accounts receivable. The company also witnessed a decline in occupancy.

For 2020, the company reported NAREIT FFO per share of $1.17, down from the prior year’s $1.44. The reported figure, nevertheless, topped the Zacks Consensus Estimate of $1.16. Total revenues of $1.06 billion slid 8.7% year on year.

Quarter in Detail

Pro-rata portfolio occupancy at the end of the fourth quarter was 93.9%, reflecting a contraction of 70 bps sequentially and 250 bps year on year. Anchor- and small-shop occupancy came in at 96.7% and 86.1%, respectively.

The company executed 247 leases aggregating 1.1 million square feet of space. This includes 92 new leases for 406,000 square feet of space in the December-end quarter, marking an increase of 37.6% from the third quarter and 18% from the prior-year period.

Pro-rata rental-rate leasing spreads on comparable spaces jumped 6%, with rental rates for new leases and renewals/options climbing 6.8% and 5.6%, respectively.

Same-property NOI declined 10.5% year over year, primarily highlighting a charge for potentially uncollectible accounts receivable.

Balance Sheet Position

Kimco exited 2020 with cash and cash equivalents of $293.19 million, up from the $123.95 million recorded at the end of 2019. The retail REIT had $2.3 billion of immediate liquidity at the end of the fourth quarter. This included full availability under its $2-billion unsecured revolving credit facility, and around $293 million in cash and cash equivalents. In addition, at the end of the quarter, Kimco held more than $700 million of Albertson’s common stock, subject to certain lock-up provisions.

Notably, Kimco’s consolidated weighted-average debt maturity profile is 10.9 years. Its upcoming debt maturities in 2021 total around 3% of total pro-rata debt. This includes $204.2 million of total pro-rata mortgage debt coming due with no unsecured debt maturities in 2021.

Outlook

Kimco projects 2021 NAREIT FFO per share at $1.18-$1.24.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Kimco Realty has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Kimco Realty has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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