What's In The Cards For Simon Property (SPG) Q1 Earnings?

Simon Property Group (NYSE:SPG) is scheduled to report first-quarter 2018 results on Apr 27 before the market opens. Both its funds from operations (FFO) per share and revenues are anticipated to moderately improve year over year.

In the last reported quarter, this Indianapolis, IN-based retail real estate investment trust (REIT) posted in-line results in terms of FFO per share. Results reflected high level of occupancy, increase in base minimum rent per square foot, and leasing spread per square foot at the company’s U.S. malls and Premium Outlets. The company also announced a hike in quarterly dividend.

Moreover, over the trailing four quarters, the company exceeded the Zacks Consensus Estimate in two occasions, met in one and missed in the other, the average beat being 0.11%. This is depicted in the graph below:

Simon Property Group, Inc. Price and EPS Surprise

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

Factors to Influence Q1 Results

While challenges faced by retail REITs have been well documented, recent data from Reis states that U.S. retail real estate vacancies remained moderately unchanged at 10% for first-quarter 2018. Although the first few months of 2018 witnessed several preeminent retail bankruptcy filings and record-high defaults by retail corporates, stability in the vacancy rates indicates an encouraging picture for retail REITs this year.

Simon Property has been quickly adapting to the changing retail landscape by increasingly adopting omni-channel strategies and overhauling properties. Importantly, the company is entering into several partnerships for upgrading services and amenities provided to its customers.

It has also re-launched its brand and marketing programs to strengthen the company’s relationship with customers and drive traffic. These efforts by the company to beat retail blues raise our optimism.

Simon Property has resorted to micro-retail modeling that offers store units ranging from 20-200 square feet of space. Such moves make its shopping malls appealing and will be conducive to revenue growth in the to-be-reported quarter.

Further, Simon Property has improved the company’s financial strength by amending and extending its 3.5-billion unsecured multi-currency revolving credit facility. In fact, the credit facility, when combined with the existing $4.0-billion revolver, offers the company $7.5 billion of total revolving credit capacity. Increased financial flexibility supports its active redevelopment and expansion pipeline

Finally, shares of Simon Property have depreciated 10.5%, versus the 11.8% loss incurred by the industry, in three months’ time.

Earnings Whispers

According to our quantitative model, chances of Simon Property likely beating the Zacks Consensus Estimate in the first quarter are high. This is because it has the right combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better — which is required to increase 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

Zacks ESP: The Earnings ESP for Simon Property is +0.5%.

Zacks Rank: Simon Property carries a Zacks Rank of 3.

Stocks That Warrant a Look

Here are a few 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:

Taubman Centers, Inc. (NYSE:TCO) , slated to release earnings on Apr 26, has an Earnings ESP of +0.47% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

GGP Inc. (NYSE:GGP) , scheduled to release quarterly numbers on May 3, has an Earnings ESP of +0.46% and a Zacks Rank of 2 (Buy).

RLJ Lodging Trust (NYSE:RLJ) , set to release first-quarter results on May 14, has an Earnings ESP of +2.68% and a Zacks Rank #3.

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

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