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Kimco Realty (KIM) Q4 FFO Meets Estimates, Occupancy Rises

Zacks

Retail real estate investment trust (REIT) Kimco Realty Corp.’s KIM fourth-quarter 2017 funds from operations (FFO) came in at 38 cents per share, in line with Zacks Consensus Estimate. The company had reported the same figure in the year-ago quarter.

The company posted revenues from rental properties of $310.6 million in the reported quarter, which surpassed the Zacks Consensus Estimate of $299.0 million. The figure compared favorably with the year-ago number of $292.9 million.

For full-year 2017, FFO per share came in at $1.55, well ahead of the prior-year tally of $1.32. This was backed by 2.7% year-over-year growth in revenues from rental properties to $1.2 billion.

Notably, the company leased more than 10.0 million square feet in 2017. This denoted the highest leasing volume in the past 10 years. Also, the company’s board authorized a $300-million share repurchase program.

Quarter in Detail

At the end of the fourth quarter, pro-rata occupancy came in at 96.0%, indicating a sequential expansion of 20 basis points (bps) and 60 bps year over year.

Same-property net operating income (NOI) inched up 1.2% year over year. Pro-rata rental-rate leasing spreads grew 9.2%, with rental rates for new leases and renewals/options, climbing 13.2% and 7.9%, respectively.

Balance Sheet Position

Kimco exited fourth-quarter 2017 with cash and cash equivalents of around $238.5 million, up from $142.5 million recorded at year-end 2016.

Portfolio Activity

During the reported quarter, Kimco sold 16 shopping centers for a gross sales price of $234.2 million, with its share of the sales price being $174.0 million. On the other hand, the company acquired one shopping center as well as two adjacent parcels, aggregating 845,000 square feet for $140.6 million, including $43.0 million of mortgage debt.

Guidance

Kimco provided its FFO per share outlook for full-year 2018. The company projects FFO per share in the range of $1.42-$1.46. This is based on same-property NOI growth (excluding redevelopments) projections of 1.25-2.00%, net dispositions estimations of $700-$900 million, and total redevelopment & development investment of $425-$525 million.

The Zacks Consensus Estimate for full-year 2018 FFO per share is currently pegged at $1.52.

Share Repurchase Program

In February 2018, Kimco’s board authorized a $300-million share-repurchase program that runs through Feb 28, 2020.

Our Viewpoint

Kimco remains on track with its strategic 2020 Vision, which envisages the disposal of non-strategic assets and ownership of premium assets in major metro markets in the United States. This is reflected in its portfolio-restructuring activities in the reported quarter.

Nevertheless, shrinking footfall at malls amid shift of consumers toward online channels, store closures and bankruptcy of retailers are expected to hurt the performance of this retail REIT. Also, we note that aggressive disposition activities have a dilutive impact on earnings and might constrain the company’s growth in the short run.

Kimco currently has a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The stock has lost 24.1% in the past three months, underperforming the 9.9% loss incurred by the industry it belongs to.

Kimco Realty Corporation Price, Consensus and EPS Surprise

Kimco Realty Corporation Price, Consensus and EPS Surprise | Kimco Realty Corporation Quote


We are now looking forward to the earnings releases of Public Storage PSA, Host Hotels & Resorts, Inc. HST and Welltower Inc. HCN all of which are expected to report in the next week.

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

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