Here's How Kimco (KIM) Is Placed Ahead of Q1 Earnings

Kimco Realty Corporation (NYSE:KIM) KIM is slated to report first-quarter 2021 earnings on Apr 29, before the market opens. The company’s quarterly results might display year-over-year declines in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Jericho, NY-based retail real estate investment trust (REIT) posted a surprise of 3.33% in terms of FFO per share. Results reflected better-than-anticipated revenue numbers.

Kimco beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in the other, the average surprise being 1.65%. This is depicted in the graph below:

Let’s see how things have shaped up prior to this announcement.

Factors in Play

Kimco enjoys ownership of high-quality assets, concentrated in the top major metro markets, which offer several growth levers. Apart from these, having a grocery component has been the saving grace of retail REITs amid these uncertain times, and for Kimco, a significant chunk of its annual base rent comes from grocery-anchored centers.

With a well-located and largely grocery-anchored portfolio that offers essential goods and services, rent-collection figures are likely to have been healthy in the first quarter. Moreover, its curbside pick-up program is anticipated to have aided the company’s performance during the quarter under consideration.

Notably, Kimco has achieved significant diversification with respect to geography and tenants. As the COVID-19 pandemic has led to a substantial increase in the number of tenants that have made late or partial rent payments, requested a deferral of rent payments, or defaulted on rent payments, this diversification is likely to have supported the company’s cash flows.

Furthermore, its focus on mixed-use assets clustered in strong economic metropolitan statistical areas (MSAs) bodes well. Kimco has been engaged over the recent years in the execution of measures to boost its capital structure, enhance growth profile and tax efficiency.

Also, the company has been making efforts to bolster its financial flexibility to tide through the current challenging environment. In the first quarter too, the company is expected to have continued to maintain its decent balance-sheet position.

However, rent and vacancy changes for retail were minimal but still tended to be negative, per the preliminary trend announcement for the commercial real estate of Moody's (NYSE:MCO) Analytics REIS. The vacancy rate increased to 10.6% in the first quarter from 10.5% in the fourth quarter of 2020, while average asking rent of $21.32 per square foot in the first quarter edged down from the prior quarter’s $21.34.

Kimco, too, is not immune to store closures and retailer bankruptcies. The tepid retail real estate environment is likely to have curbed its growth momentum in the to-be-reported quarter, as secular industry headwinds continue dampening industry fundamentals. Additionally, rent relief and deferral requests from its tenants might have hurt revenue growth.

Nevertheless, with the reopening of additional tenants, the company is likely to have witnessed better rent collections and a lesser need for rent deferral agreements.

The Zacks Consensus Estimate for Kimco’s quarterly revenues is currently pinned at $265.83 million, calling for an 8.25% decline from the prior-year quarter.

In addition to the above, Kimco’s activities during the first quarter were inadequate to gain analyst confidence. The Zacks Consensus Estimate of 30 cents for quarterly FFO per share remained unrevised over the past month. The figure also calls for a decline of 18.9%, year over year.

Here is what our quantitative model predicts:

Our proven model predicts a positive 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 a FFO beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Kimco currently carries a Zacks Rank #3 and has an Earnings ESP of +0.51%.

Other Stocks That Warrant a Look

Here are a few other stocks in the REIT sector that you may want to consider, as our model shows that these too have the right combination of elements to report positive surprises this quarter:

Digital Realty (NYSE:DLR) Trust, Inc. DLR, scheduled to announce quarterly numbers on Apr 29, currently has an Earnings ESP of +1.06% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

CubeSmart CUBE, slated to release first-quarter numbers on Apr 29, has an Earnings ESP of +3.14% and carries a Zacks Rank of 3 at present.

Welltower (NYSE:WELL), Inc. WELL, set to report quarterly results on Apr 28, currently has an Earnings ESP of +0.93% and carries a Zacks Rank of 3.

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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