Kimco Realty Corporation KIM is slated to report first-quarter 2024 results on May 2, before the opening bell. The company’s quarterly results are likely to display year-over-year growth in revenues and funds from operations (FFO) per share.
In the last reported quarter, this Jericho, NY-based retail real estate investment trust (REIT) delivered an in-line performance in terms of FFO per share. Though Kimco reported growth in revenues, a rise in interest expenses acted as a dampener.
Over the preceding four quarters, Kimco’s FFO per share surpassed the Zacks Consensus Estimate on one occasion and met in the remaining three periods, the average beat being 0.64%. This is depicted in the graph below:
Kimco Realty Corporation Price and EPS Surprise
Kimco Realty Corporation price-eps-surprise | Kimco Realty Corporation Quote
US Retail Real Estate Market in Q1
Per a Cushman & Wakefield CWK report, despite weakness in space demand in the first quarter of 2024, the U.S. retail real estate market fundamentals remain healthy on the back of resilient economic growth in 2024. However, high interest rates, consumer debt and the cumulative effects of inflation are starting to impact the market negatively.
On a year-over-year basis, the national retail vacancy fell 20 basis points to 5.4% in the first quarter. The vacancy rate was in line with the average over the previous four quarters and among the lowest rates since 2007.
Asking rents continue to increase in response to a tight market. On average, the asking rents for shopping centers improved 3.9% year over year to $23.98 per square foot in the first quarter.
The first quarter witnessed a negative net absorption in the retail market, totaling 1.2 million square feet (msf) nationally. This marked the first negative reading since the first quarter of 2021. Negative absorption in the first quarter was due to the lack of new retail construction and limited supply of available space in high-quality retail centers that have hampered the amount of new leasing activity. Moreover, increased store closures from several large retail firms also affected absorption totals.
Since the pandemic, new retail construction has been modest, and it has further retrenched due to high interest rates and risk aversion by banks and other sources of finance.
Factors at Play
Kimco owns properties in the drivable first-ring suburbs of its top major metropolitan Sunbelt and coastal markets, which offer several growth levers like high employment and strong spending power. Given a healthy retail real estate environment in the first quarter, the company is likely to have witnessed decent demand for its properties, boosting its quarterly performance.
Led by a healthy mix of essential, necessity-based tenants and omnichannel retailers, this retail REIT enjoys a diverse tenant base. This is likely to have aided stable revenue generation during the to-be-reported quarter, boosting top-line growth.
As the mixed-use segment continues to gain from the recovery in the apartment and retail sectors, Kimco’s focus on developing mixed-use assets clustered in strong economic metropolitan statistical areas that serve the last mile is likely to have given it an edge by driving net asset value.
The company’s top line is expected to have improved due to these tailwinds. The Zacks Consensus Estimate for KIM’s quarterly revenues stands at $472.9 million, implying 6.8% growth from the prior-year reported number. The consensus mark for revenues from the rental property is currently pegged at $464.7 million, up from $438.3 million in the year-ago period.
Our estimate for net revenues from rental properties stands at $463.7 million, suggesting a 5.8% increase year over year and leased occupancy of 96.6%, implying a 40-basis point increase from the prior quarter.
The company’s solid balance sheet position is likely to have supported its growth endeavors.
However, a rise in interest expenses is anticipated to have cast a pall on Kimco’s performance to some extent during the quarter. We estimate a year-over-year increase of 10.2% in its first-quarter interest expenses.
Before the first-quarter earnings release, the company’s activities were adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been revised a cent upward to 38 cents in the past month. However, it suggests a year-over-year decrease of 2.6%.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict a surprise in terms of FFO per share for Kimco this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
Kimco currently has an Earnings ESP of -0.59% and carries a Zacks Rank of 4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the broader REIT sector — Public Storage PSA and Medical Properties Trust MPW — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
Public Storage, scheduled to report quarterly numbers on Apr 30, has an Earnings ESP of +0.50% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medical Properties, slated to release quarterly numbers on May 9, has an Earnings ESP of +3.22% and carries a Zacks Rank of 3 at present.
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.
Only $1 to See All Zacks’ Buys and Sells
We’re not kidding.
Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.
Thousands have taken advantage of this opportunity. Thousands did not – they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.
Public Storage (PSA) : Free Stock Analysis Report
Kimco Realty Corporation (KIM) : Free Stock Analysis Report
Medical Properties Trust, Inc. (MPW) : Free Stock Analysis Report
Cushman & Wakefield PLC (CWK) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
