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Kimco Realty (KIM) Q1 Earnings: What's in Store for Stock?

Kimco Realty Corporation KIM is slated to report first-quarter 2016 results on Apr 27, after the market closes. We expect the release to lead to stock movement.

Last quarter, this New Hyde Park, NY-based retail real estate investment trust (“REIT”) delivered a positive earnings surprise of 5.71%. In the four trailing quarters, the company beat estimates in three, with a positive average earnings surprise of 2.66%. The Zacks Consensus Estimate for first-quarter funds from operations (“FFO”) per share is currently 37 cents.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Kimco’s premium properties in high-growth areas, presence of well-capitalized retailers in its tenant roaster, and investments in high-quality neighborhood and community shopping centers augur well. Moreover, amid an improvement in demand for small shop, the company’s present focus on expanding this category of retail assets is also encouraging.

In fact, in the first quarter, the company’s average base rent for the U.S. portfolio is expected to have continued to improve. Though lackluster retail sales in the quarter are reasons to worry about, the absence of ample supply may have kept the demand/supply dynamics favorable. As such, leasing spreads are projected to have grown.

Further, Kimco is focused on simplifying its business structure by concentrating on its U.S. shopping center portfolio, targeting ownership of large, high-quality assets in major metro markets, and simultaneously exiting from its joint venture portfolio. In the first quarter, the company completed around $460.8 million transactions, including the disposition of seven Canadian shopping centers. Its transaction activity from January to March reflects net selling and capital accumulation.

While such efforts are encouraging for the long term, the earnings-dilution led by high disposition activity cannot be averted. These might hurt the company’s growth momentum in the to-be-reported quarter.

Kimco’s activities during the quarter could not gain adequate analyst confidence. Consequently, the Zacks Consensus Estimate remained unchanged at 37 cents over the last seven days.

Earnings Whispers

Our proven model does not conclusively show that Kimco will beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 37 cents. Hence, the Earnings ESP, which represents the percentage difference between the two, is 0.00%.

Zacks Rank: Although the company’s Zacks Rank #3 increases the predictive power of ESP, its zero ESP makes a surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that they have the right combination of elements to post a positive surprise this quarter:

Essex Property Trust Inc. ESS has an Earnings ESP of +1.14% and a Zacks Rank #2. The company will report results on Apr 28.

Taubman Centers, Inc. TCO has an Earnings ESP of +3.53% and a Zacks Rank #3. The company will release results on May 2.

Vornado Realty Trust VNO has an Earnings ESP of +2.44% and a Zacks Rank #3. The company will report first-quarter 2016 results on May 2.


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 earnings per share numbers presented in this write up represent FFO per share.

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KIMCO REALTY CO (KIM): Free Stock Analysis Report
 
TAUBMAN CENTERS (TCO): Free Stock Analysis Report
 
ESSEX PPTY TR (ESS): Free Stock Analysis Report
 
VORNADO RLTY TR (VNO): Free Stock Analysis Report
 
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