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What Awaits The Necessity Retail REIT (RTL) in Q2 Earnings?
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The Necessity Retail REIT, Inc.’s second-quarter 2022 results are slated for an Aug 3 release after the bell. The company’s quarterly results are likely to display increases in revenues and funds from operations (FFO) per share.
In the last reported quarter, this REIT delivered a surprise of 9.09% in terms of adjusted FFO per share. Results reflected a better-than-expected improvement in revenues.
Over the trailing four quarters, the company surpassed estimates on three occasions and missed on the other, the average surprise being 12.34%. This is depicted in the graph below:
The Necessity Retail REIT, Inc. Price and EPS Surprise
Let’s see how things have shaped up before this announcement.
Factors to Consider
This REIT, which acquires and manages a diversified portfolio of primarily necessity-based retail single-tenant and open-air shopping center properties in the United States, is poised to benefit from improving trends in the sector.
Per a report from CBRE Group (CBRE - Free Report) , retail real estate metrics remained strong in the second quarter, even amid weak retail sales growth. Total retail sales increased 3.8% year over year in the second quarter, lower than the five-year quarterly average of 7.0%. The average retail asking rent improved 2.4% year over year to $22.39 per square foot in the second quarter. It marked the highest annual growth rate since the first quarter of 2017. The retail availability rate in the second quarter hit a 10-year low of 5.1%.
Retail space absorption decreased 40% quarter over quarter and 20% year over year to 19.9 million square feet in the second quarter. Second-quarter absorptions were mainly driven by an expansion by existing retailers as new developments remained muted, per the CBRE Group report.
For The Necessity Retail REIT, 63% of the portfolio annualized straight-line rent is derived from necessity-based retail tenants who are more resilient to e-commerce and economic cycles than traditional retail. Also, 64% of its top 20 tenants are actual or implied investment-grade rated and 86% are necessity-based retail. This is likely to have ensured a steady stream of revenues for The Necessity Retail REIT in the second quarter.
RTL focuses on external growth through the exploration of accretive acquisition opportunities. Such trends are anticipated to have continued in the to-be-reported quarter. Its first-quarter 2022 acquisitions amounted to $842 million at a cash cap rate of 7.3% and a weighted average cap rate of 8.6%. Also, the company had a second-quarter acquisition pipeline of $536 million as of Mar 31, 2022.
In May, The Necessity Retail REIT announced the completion of the acquisition of The Plant, a 509,000-square-foot open-air shopping center in San Jose, CA, for roughly $175 million, excluding closing costs. This comes as part of the prior-announced $1.3-billion open-air shopping center acquisition from certain subsidiaries of CIM Real Estate Finance Trust. Through May 31, 2022, 80 of the 81 properties closed, denoting $1.2 billion of the total $1.3 billion contract purchase price and $110 million of the total $115 million annualized straight-line rent.
The acquisitions of well-located commercial properties add to the company’s scale, offering a competitive edge to its industry. Hence, solid property acquisition volumes at decent investment spreads are likely to have aided the company’s performance.
The Zacks Consensus Estimate for quarterly revenues is pegged at $99.95 million, suggesting a 22.5% increase from the year-ago quarter.
However, RTL’s activities during the soon-to-be-reported quarter were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the second-quarter FFO per share has remained unrevised at 27 cents. However, it suggests 3.85% growth year over year.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for The Necessity Retail REIT this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an FFO beat. However, that’s not the case here.
The Necessity Retail REIT currently carries a Zacks Rank of 3 and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Here are two stocks from the broader REIT sector — Public Storage (PSA - Free Report) and Host Hotels & Resorts, Inc. (HST - Free Report) — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
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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What Awaits The Necessity Retail REIT (RTL) in Q2 Earnings?
The Necessity Retail REIT, Inc.’s second-quarter 2022 results are slated for an Aug 3 release after the bell. The company’s quarterly results are likely to display increases in revenues and funds from operations (FFO) per share.
In the last reported quarter, this REIT delivered a surprise of 9.09% in terms of adjusted FFO per share. Results reflected a better-than-expected improvement in revenues.
Over the trailing four quarters, the company surpassed estimates on three occasions and missed on the other, the average surprise being 12.34%. This is depicted in the graph below:
The Necessity Retail REIT, Inc. Price and EPS Surprise
The Necessity Retail REIT, Inc. price-eps-surprise | The Necessity Retail REIT, Inc. Quote
Let’s see how things have shaped up before this announcement.
Factors to Consider
This REIT, which acquires and manages a diversified portfolio of primarily necessity-based retail single-tenant and open-air shopping center properties in the United States, is poised to benefit from improving trends in the sector.
Per a report from CBRE Group (CBRE - Free Report) , retail real estate metrics remained strong in the second quarter, even amid weak retail sales growth. Total retail sales increased 3.8% year over year in the second quarter, lower than the five-year quarterly average of 7.0%. The average retail asking rent improved 2.4% year over year to $22.39 per square foot in the second quarter. It marked the highest annual growth rate since the first quarter of 2017. The retail availability rate in the second quarter hit a 10-year low of 5.1%.
Retail space absorption decreased 40% quarter over quarter and 20% year over year to 19.9 million square feet in the second quarter. Second-quarter absorptions were mainly driven by an expansion by existing retailers as new developments remained muted, per the CBRE Group report.
For The Necessity Retail REIT, 63% of the portfolio annualized straight-line rent is derived from necessity-based retail tenants who are more resilient to e-commerce and economic cycles than traditional retail. Also, 64% of its top 20 tenants are actual or implied investment-grade rated and 86% are necessity-based retail. This is likely to have ensured a steady stream of revenues for The Necessity Retail REIT in the second quarter.
RTL focuses on external growth through the exploration of accretive acquisition opportunities. Such trends are anticipated to have continued in the to-be-reported quarter. Its first-quarter 2022 acquisitions amounted to $842 million at a cash cap rate of 7.3% and a weighted average cap rate of 8.6%. Also, the company had a second-quarter acquisition pipeline of $536 million as of Mar 31, 2022.
In May, The Necessity Retail REIT announced the completion of the acquisition of The Plant, a 509,000-square-foot open-air shopping center in San Jose, CA, for roughly $175 million, excluding closing costs. This comes as part of the prior-announced $1.3-billion open-air shopping center acquisition from certain subsidiaries of CIM Real Estate Finance Trust. Through May 31, 2022, 80 of the 81 properties closed, denoting $1.2 billion of the total $1.3 billion contract purchase price and $110 million of the total $115 million annualized straight-line rent.
The acquisitions of well-located commercial properties add to the company’s scale, offering a competitive edge to its industry. Hence, solid property acquisition volumes at decent investment spreads are likely to have aided the company’s performance.
The Zacks Consensus Estimate for quarterly revenues is pegged at $99.95 million, suggesting a 22.5% increase from the year-ago quarter.
However, RTL’s activities during the soon-to-be-reported quarter were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the second-quarter FFO per share has remained unrevised at 27 cents. However, it suggests 3.85% growth year over year.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for The Necessity Retail REIT this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an FFO beat. However, that’s not the case here.
The Necessity Retail REIT currently carries a Zacks Rank of 3 and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Here are two stocks from the broader REIT sector — Public Storage (PSA - Free Report) and Host Hotels & Resorts, Inc. (HST - Free Report) — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
Public Storage, slated to release quarterly numbers on Aug 4, has an Earnings ESP of +0.31% and carries a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Host Hotels & Resorts, scheduled to report quarterly numbers on Aug 3, currently has an Earnings ESP of +9.18 % and carries a Zacks Rank of 2.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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.