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Is it Wise to Hold Simon (SPG) in Your Portfolio Right Now?

Zacks

We updated our research report on Simon Property Group, Inc. SPG on May 15.

This Indianapolis, IN-based retail real estate investment trust (REIT) is engaged in acquiring, owning and leasing a diverse portfolio of shopping malls. In first-quarter 2017, the company reported funds from operations (FFO) of $2.74 per share, missing the Zacks Consensus Estimate by 2 cents. However, the figure came in higher than $2.63 per share reported in the prior-year quarter. Despite choppy retail environment during the quarter, the company reaffirmed its earlier outlook.

In the last 30 days, the company’s second-quarter and full-year 2017 FFO per share estimates moved down. In fact, increasing consumer purchases through the Internet has emerged as a pressing concern for retail REITs. While Simon Property is making attempts to counter the pressure through various initiatives, the implementation of such measures requires a decent upfront cost, and therefore would limit any robust growth in its profit margins in the near term.

Shares of Simon Property underperformed the Zacks categorized REIT and Equity Trust – Retail industry in the last three months. While the stock declined 12.5%, the industry lost 9.2%.



However, Simon Property enjoys a wide exposure to retail assets across the U.S. Moreover, the company’s international presence fosters sustainable long-term growth compared with its domestically focused peers. Moreover, the company has been active in restructuring its portfolio and is aiming at premium acquisitions and transformative redevelopments. The company is well poised to effectively leverage the improving spending habits of wealthier customers amid an improving economy.

Currently, Simon Property carries a Zacks Rank #3 (Hold).

Investors interested in the REIT space, may consider stocks like American Tower Corporation AMT, CareTrust REIT, Inc. CTRE and Equity LifeStyle Properties, Inc. ELS, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the last 30 days, American Tower Corporation’s FFO per share for second-quarter 2017 increased 1.3% to $1.55.

In the last 30 days, CareTrust REIT’s FFO per share for second-quarter 2017 remained unchanged at 30 cents.

Equity LifeStyle Properties’ second-quarter 2017 FFO per share estimates decreased 1.2% to 81 cents, in the last 30 days.

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. All EPS numbers presented in this write up represent FFO per share.

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