What's In The Cards For Regency Centers' (REG) Q2 Earnings?

Regency Centers Corp. (NASDAQ:REG) is slated to report second-quarter 2019 results on Aug 1, after the market closes. Its funds from operations (FFO) per share are anticipated to reflect year-over-year growth.

In the last reported quarter, this Jacksonville, FL-based retail real estate investment trust (REIT) beat the Zacks Consensus Estimate for FFO per share by 2.08%. Results reflected growth in revenues.

Further, the company has a decent surprise history. It beat the Zacks Consensus Estimate in each of the trailing four quarters, the average positive surprise being 2.12%. This is depicted in the graph below:

Regency Centers Corporation Price and EPS Surprise

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

Factors at Play

Regency has a considerable experience in the retail real estate industry and has developed several retail real estate projects over the years. The company is able to differentiate itself by strategically focusing on building a premium portfolio of grocery-anchored shopping centers. Such centers are usually necessity driven and drive a dependable traffic. Along with the presence of leading grocers in its tenant roster, the company also has restaurants and service providers.

Its properties are primarily located in strong trade areas characterized by high spending power. This helps the company attract top grocers and retailers. Regency also has a cluster of industry-leading grocers which augurs well for steady cash flows generation and long-term growth.

However, the choppy retail real estate environment might limit its growth momentum to some extent as secular industry headwinds, including retailer downsizing and tenant bankruptcies keep denting industry fundamentals. Amid these, the Zacks Consensus Estimate for the second-quarter revenues is pegged at $271.9 million, indicating a marginal year-over-year decline of 0.9%.

Notably, the recent data from Reis shows that the vacancy rate of neighborhood and community shopping center contracted 10 basis points sequentially to 10.1% in the second quarter, denoting its first decline since first-quarter 2016. The Regional Mall vacancy rate was flat in the second quarter at 9.3%. Store closures continue to affect Regional Mall vacancy. Nonetheless, both, national average asking rent and effective rent, which nets out landlord concessions, inched up 0.4% sequentially and 1.7% from the year-ago quarter.

The retail real estate market continues to be affected by store closures and is undergoing structural changes. Nonetheless, the latest stability in the vacancy rate and rent levels underlines that the sector has been able to battle such challenges as retail landlords continued their transformation initiatives, while there is minimal construction activity in the pipeline.

Additionally, Regency’s activities during the April-June quarter were adequate to gain analyst confidence. The Zacks Consensus Estimate for FFO per share witnessed marginal upward revision over the past month and is currently pinned at 96 cents. The figure also indicates a 3.2% increase year over year.

Here is what our quantitative model predicts:

Regency has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Regency is +0.10%.

Zacks Rank: Regency carries a Zacks Rank #3, currently.

A positive Earnings ESP is a meaningful and leading indicator of a likely beat in terms of FFO per share. This, when combined with a favorable Zacks rank, makes us reasonably confident of a positive surprise.

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 have the right combination of elements to report a positive surprise this quarter:

Federal Realty Investment Trust (NYSE:FRT) , scheduled to release earnings on Aug 1, has an Earnings ESP of +0.18% and currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Tanger Factory Outlet Centers, Inc. (NYSE:SKT) , set to report quarterly results on Jul 31, has an Earnings ESP of +1.23% and carries a Zacks Rank of 3, at present.

Realty Income Corporation (NYSE:O) , slated to report second-quarter results on Aug 5, has an Earnings ESP of +0.78% and holds a Zacks Rank of 3, currently.

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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