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What's in Store for Federal Realty (FRT) This Earnings Season?
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Federal Realty Investment Trust (FRT - Free Report) , a leading real estate investment trust (REIT) focused on retail properties, is set to report its second-quarter 2024 results on Aug 1 after market close. In anticipation of the announcement, industry analysts and investors are eager to assess the company's performance and prospects in the current economic climate.
In the last reported quarter, this retail REIT came up with an FFO per share of $1.64, which missed the Zacks Consensus Estimate by a penny. Results reflected lower occupancy levels on a year-over-year basis.
Over the last four quarters, Federal Realty surpassed estimates on two occasions, missed on one occasion and met on the remaining period, the average beat being 1.08%. The graph below depicts the surprise history of the company:
Federal Realty Investment Trust Price and EPS Surprise
In this article, we will dive deep into the U.S. retail real estate market environment and the company's fundamentals and analyze the factors that may have contributed to its second-quarter 2024 performance.
U.S. Retail Real Estate Market in Q2
Per a Cushman & Wakefield (CWK - Free Report) report, although gains in real income and employment continue to support consumer spending, the growth rate has decelerated and become more uneven in recent months. For the first time in years, the retail market is at the point of being supply-constrained, particularly in quality shopping centers.
On a year-over-year basis, the national retail vacancy rate remained unchanged at 5.3% in the second quarter. The vacancy rate was steady for the third consecutive quarter and was among the lowest rates since 2007.
Asking rents continue to increase in response to a tight market. On average, the asking rents for shopping centers improved 3.8% year over year to $24.37 per square foot in the second quarter.
The second quarter witnessed a positive net absorption in the retail market, totaling 1.4 million square feet (msf) nationally. This marked a bounce back from its first negative reading over the past three years, recorded in the first quarter of 2024.
Since 2020, new retail construction has been minimal, and it has further retrenched due to high interest rates and other financing challenges.
Projections
Federal Realty is expected to have benefited from its portfolio of high-quality retail properties, primarily positioned in major coastal markets spanning from Washington, D.C. to Boston, San Francisco and Los Angeles. FRT’s properties are strategically located in the first-ring suburbs of nine major high-barrier markets, with solid average household income and spending power, ensuring resilience and growth.
Due to strong demographics and the prime location of its properties, the company has consistently upheld a high occupancy rate over the years. FRT's diverse mix of retail tenants is anticipated to have contributed to stable rental income during the second quarter.
FRT's strategic focus on mixed-use properties enables the company to benefit from multiple revenue streams. By combining residential, retail and office spaces, these properties attract a variety of tenants, creating a vibrant, bustling atmosphere that draws in consumers. This diversification is likely to have played a crucial role in FRT's second-quarter 2024 performance as it insulates the company from the fluctuations and uncertainties of a single sector.
Furthermore, Federal Realty is expected to have enjoyed a healthy financial position in the quarter.
Our estimation places FRT's leasing rate at 94.4%, up 10 basis points sequentially, while the rent per square foot is projected to grow 3.9% year over year.
The Zacks Consensus Estimate for quarterly revenues is pegged at $292.9 million, which indicates a 4.4% increase from the year-ago period. The consensus mark for rental revenues is pegged at $290.2 million, which suggests a rise from the year-ago period’s $280.4 million.
Rental income from minimum rents — commercial — is presently pegged at $189.6 million, up from $184.2 in the year-ago period. Rental income from cost reimbursements is projected at $55.6 million, up from $51.2 million in the prior-year period.
However, a high interest rate environment is a concern for Federal Realty. Elevated rates imply high borrowing costs for the company, and our estimate suggests a marginal increase in the company's second-quarter 2024 interest expenses on a year-over-year basis.
Federal Realty’s activities during the soon-to-be-reported quarter were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the second-quarter FFO per share has remained unchanged at $1.68 over the past month. However, it suggests a marginal increase year over year.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict a surprise in terms of FFO per share for Federal Realty 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 an FFO beat, which is not the case here.
Federal Realty currently has an Earnings ESP of -0.15% and carries a Zacks Rank of 3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the retail REIT sector — Simon Property Group (SPG - Free Report) and Tanger, Inc. (SKT - Free Report) — 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's in Store for Federal Realty (FRT) This Earnings Season?
Federal Realty Investment Trust (FRT - Free Report) , a leading real estate investment trust (REIT) focused on retail properties, is set to report its second-quarter 2024 results on Aug 1 after market close. In anticipation of the announcement, industry analysts and investors are eager to assess the company's performance and prospects in the current economic climate.
In the last reported quarter, this retail REIT came up with an FFO per share of $1.64, which missed the Zacks Consensus Estimate by a penny. Results reflected lower occupancy levels on a year-over-year basis.
Over the last four quarters, Federal Realty surpassed estimates on two occasions, missed on one occasion and met on the remaining period, the average beat being 1.08%. The graph below depicts the surprise history of the company:
Federal Realty Investment Trust Price and EPS Surprise
Federal Realty Investment Trust price-eps-surprise | Federal Realty Investment Trust Quote
In this article, we will dive deep into the U.S. retail real estate market environment and the company's fundamentals and analyze the factors that may have contributed to its second-quarter 2024 performance.
U.S. Retail Real Estate Market in Q2
Per a Cushman & Wakefield (CWK - Free Report) report, although gains in real income and employment continue to support consumer spending, the growth rate has decelerated and become more uneven in recent months. For the first time in years, the retail market is at the point of being supply-constrained, particularly in quality shopping centers.
On a year-over-year basis, the national retail vacancy rate remained unchanged at 5.3% in the second quarter. The vacancy rate was steady for the third consecutive quarter and was among the lowest rates since 2007.
Asking rents continue to increase in response to a tight market. On average, the asking rents for shopping centers improved 3.8% year over year to $24.37 per square foot in the second quarter.
The second quarter witnessed a positive net absorption in the retail market, totaling 1.4 million square feet (msf) nationally. This marked a bounce back from its first negative reading over the past three years, recorded in the first quarter of 2024.
Since 2020, new retail construction has been minimal, and it has further retrenched due to high interest rates and other financing challenges.
Projections
Federal Realty is expected to have benefited from its portfolio of high-quality retail properties, primarily positioned in major coastal markets spanning from Washington, D.C. to Boston, San Francisco and Los Angeles. FRT’s properties are strategically located in the first-ring suburbs of nine major high-barrier markets, with solid average household income and spending power, ensuring resilience and growth.
Due to strong demographics and the prime location of its properties, the company has consistently upheld a high occupancy rate over the years. FRT's diverse mix of retail tenants is anticipated to have contributed to stable rental income during the second quarter.
FRT's strategic focus on mixed-use properties enables the company to benefit from multiple revenue streams. By combining residential, retail and office spaces, these properties attract a variety of tenants, creating a vibrant, bustling atmosphere that draws in consumers. This diversification is likely to have played a crucial role in FRT's second-quarter 2024 performance as it insulates the company from the fluctuations and uncertainties of a single sector.
Furthermore, Federal Realty is expected to have enjoyed a healthy financial position in the quarter.
Our estimation places FRT's leasing rate at 94.4%, up 10 basis points sequentially, while the rent per square foot is projected to grow 3.9% year over year.
The Zacks Consensus Estimate for quarterly revenues is pegged at $292.9 million, which indicates a 4.4% increase from the year-ago period. The consensus mark for rental revenues is pegged at $290.2 million, which suggests a rise from the year-ago period’s $280.4 million.
Rental income from minimum rents — commercial — is presently pegged at $189.6 million, up from $184.2 in the year-ago period. Rental income from cost reimbursements is projected at $55.6 million, up from $51.2 million in the prior-year period.
However, a high interest rate environment is a concern for Federal Realty. Elevated rates imply high borrowing costs for the company, and our estimate suggests a marginal increase in the company's second-quarter 2024 interest expenses on a year-over-year basis.
Federal Realty’s activities during the soon-to-be-reported quarter were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the second-quarter FFO per share has remained unchanged at $1.68 over the past month. However, it suggests a marginal increase year over year.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict a surprise in terms of FFO per share for Federal Realty 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 an FFO beat, which is not the case here.
Federal Realty currently has an Earnings ESP of -0.15% and carries a Zacks Rank of 3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the retail REIT sector — Simon Property Group (SPG - Free Report) and Tanger, Inc. (SKT - Free Report) — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
Simon Property, scheduled to report quarterly numbers on Aug 5, has an Earnings ESP of +0.44% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Tanger is slated to report quarterly numbers on Aug 1. SKT has an Earnings ESP of +0.94% and carries a Zacks Rank of 2 presently.
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.