We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Will Retail Blues Impede Realty Income's (O) Q2 Earnings?
Read MoreHide Full Article
Realty Income Corp. (O - Free Report) is scheduled to report second-quarter 2018 results after the market closes on Aug 1. The company’s results are estimated to reflect year-over-year rise in funds from operations (FFO) per share and revenues.
In the last reported quarter, this monthly dividend-paying real estate investment trust (REIT) delivered an in-line performance in terms of FFO per share. The company benefited from revenue growth in the quarter and also attained its highest quarter-end occupancy in more than 10 years.
Notably, Realty Income has a mixed surprise history. The company surpassed estimates in one occasion, missed in another and met in the other two, over the trailing four quarters, resulting in an average positive surprise of 0.01%. This is depicted in the graph below:
Let’s see how things are shaping up for this announcement.
Factors to Consider
Despite several preeminent retail bankruptcy filings and record-high defaults by retail corporates, recent data form Reis shows that the national retail vacancy rate marginally increased to 10.2% in second-quarter 2018 — underlining store closures of bankrupt toy retailer, Toys “R” Us Inc. — while national average asking rents edged 0.2% higher.
However, Realty Income’s portfolio is well diversified with respect to tenant, industry, geography and property type. Besides retail properties, the company’s portfolio comprises industrial, office, as well as agricultural properties. This diversification helps it mitigate risks associated with a particular industry, geography or asset type.
More importantly, the company derives more than 90% of its annualized retail rental revenues from tenants with a service, non-discretionary, and/or low price point component to their business. Such businesses are less susceptible to economic recessions, as well as competition from Internet retailing.
This is expected to have helped the company enjoy higher retail revenues in the April-June quarter. In fact, the Zacks Consensus Estimate for second-quarter revenues is pegged at $329.4 million, indicating a year-over-year rise of 9.7%. The Zacks Consensus Estimate for rental revenues of $310 million also denotes a projected increase of 7.6% year over year.
Additionally, Realty Income’s solid underlying real estate quality and prudent underwriting at acquisition has helped the company maintain high occupancy levels consistently. In fact, since 1996, the company’s occupancy level has never been below 96%. Also, in first-quarter 2018, the company attained its highest quarter-end occupancy in more than 10 years. The trend is expected to have continued in the to-be-reported quarter as well. Also, its same-store rent growth is likely to exhibit limited operational volatility.
Amid these, the Zacks Consensus Estimate for second-quarter FFO per share is 79 cents, indicating nearly 4% growth from the comparable period last year.
Nonetheless, despite all these efforts, the choppy retail real estate environment might limit the growth momentum to some extent. In addition, the company has substantial exposure to single-tenant assets which raises its risks associated with tenant default. Further, prior to the second-quarter earnings release, there is lack of any solid catalyst. As such, the Zacks Consensus Estimate of FFO per share for Q2 remained unchanged at 79 cents over the past month.
Earnings Whispers
Our proven model does not conclusively show that Realty Income will likely beat estimates this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP is -1.27%.
Zacks Rank: Realty Income has a Zacks Rank of 3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of a positive surprise.
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:
Chatham Lodging Trust (CLDT - Free Report) , scheduled to release quarterly figures on Aug 1, has an Earnings ESP of +1.14% and a Zacks Rank #3.
HCP, Inc. (HCP - Free Report) , set to report Q2 numbers on Aug 2, has an Earnings ESP of +0.60% and carries a Zacks Rank of 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.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Will Retail Blues Impede Realty Income's (O) Q2 Earnings?
Realty Income Corp. (O - Free Report) is scheduled to report second-quarter 2018 results after the market closes on Aug 1. The company’s results are estimated to reflect year-over-year rise in funds from operations (FFO) per share and revenues.
In the last reported quarter, this monthly dividend-paying real estate investment trust (REIT) delivered an in-line performance in terms of FFO per share. The company benefited from revenue growth in the quarter and also attained its highest quarter-end occupancy in more than 10 years.
Notably, Realty Income has a mixed surprise history. The company surpassed estimates in one occasion, missed in another and met in the other two, over the trailing four quarters, resulting in an average positive surprise of 0.01%. This is depicted in the graph below:
Realty Income Corporation Price and EPS Surprise
Realty Income Corporation Price and EPS Surprise | Realty Income Corporation Quote
Let’s see how things are shaping up for this announcement.
Factors to Consider
Despite several preeminent retail bankruptcy filings and record-high defaults by retail corporates, recent data form Reis shows that the national retail vacancy rate marginally increased to 10.2% in second-quarter 2018 — underlining store closures of bankrupt toy retailer, Toys “R” Us Inc. — while national average asking rents edged 0.2% higher.
However, Realty Income’s portfolio is well diversified with respect to tenant, industry, geography and property type. Besides retail properties, the company’s portfolio comprises industrial, office, as well as agricultural properties. This diversification helps it mitigate risks associated with a particular industry, geography or asset type.
More importantly, the company derives more than 90% of its annualized retail rental revenues from tenants with a service, non-discretionary, and/or low price point component to their business. Such businesses are less susceptible to economic recessions, as well as competition from Internet retailing.
This is expected to have helped the company enjoy higher retail revenues in the April-June quarter. In fact, the Zacks Consensus Estimate for second-quarter revenues is pegged at $329.4 million, indicating a year-over-year rise of 9.7%. The Zacks Consensus Estimate for rental revenues of $310 million also denotes a projected increase of 7.6% year over year.
Additionally, Realty Income’s solid underlying real estate quality and prudent underwriting at acquisition has helped the company maintain high occupancy levels consistently. In fact, since 1996, the company’s occupancy level has never been below 96%. Also, in first-quarter 2018, the company attained its highest quarter-end occupancy in more than 10 years. The trend is expected to have continued in the to-be-reported quarter as well. Also, its same-store rent growth is likely to exhibit limited operational volatility.
Amid these, the Zacks Consensus Estimate for second-quarter FFO per share is 79 cents, indicating nearly 4% growth from the comparable period last year.
Nonetheless, despite all these efforts, the choppy retail real estate environment might limit the growth momentum to some extent. In addition, the company has substantial exposure to single-tenant assets which raises its risks associated with tenant default. Further, prior to the second-quarter earnings release, there is lack of any solid catalyst. As such, the Zacks Consensus Estimate of FFO per share for Q2 remained unchanged at 79 cents over the past month.
Earnings Whispers
Our proven model does not conclusively show that Realty Income will likely beat estimates this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP is -1.27%.
Zacks Rank: Realty Income has a Zacks Rank of 3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of a positive surprise.
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:
Extra Space Storage Inc. (EXR - Free Report) , slated to release June-end quarter results on Jul 31, has an Earnings ESP of +0.80% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chatham Lodging Trust (CLDT - Free Report) , scheduled to release quarterly figures on Aug 1, has an Earnings ESP of +1.14% and a Zacks Rank #3.
HCP, Inc. (HCP - Free Report) , set to report Q2 numbers on Aug 2, has an Earnings ESP of +0.60% and carries a Zacks Rank of 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.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>