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What's in the Cards for Kimco Realty Stock in Q3 Earnings?
Kimco Realty Corporation KIM is slated to report third-quarter 2024 results on Oct. 31, before the opening bell. The company’s quarterly results are likely to display year-over-year growth in revenues and funds from operations (FFO) per share.
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In the last reported quarter, this Jericho, NY-based retail real estate investment trust (REIT) outpaced the Zacks Consensus Estimate by 2.5% in terms of FFO per share. Though Kimco reported year over year growth in revenues, a rise in interest expenses acted as a dampener.
Over the preceding four quarters, Kimco’s FFO per share surpassed the Zacks Consensus Estimate on three occasions and met in the remaining period, the average beat being 1.9%. This is depicted in the graph below:
Per a Cushman & Wakefield CWK report, there has been a pullback in net absorption for U.S. shopping centers, resulting in a slight negative shift in the third quarter. With absorption falling down, rent growth continued to moderate in the quarter. However, with new constructions remaining subdued, the national vacancy rate remained near a historic low of 5.4%.
The third quarter witnessed a negative net absorption in U.S. shopping centers, totaling 0.26 million square feet (msf). The decrease was due to a negative net absorption of 1.8 msf observed in the country’s southern region.
The asking rents for U.S. shopping centers increased 3.4% year over year to $24.54 per square foot in the third quarter.
New construction activity remains subdued, and 2024 is expected to be the weakest year for new construction on record. As of the third quarter of 2024, there are 11.1 msf under construction within a market with an inventory of 4.31 billion square feet, resulting in virtually no supply risk.
Factors to Consider Ahead of KIM’s Upcoming Results
Kimco owns properties in the drivable first-ring suburbs of its top major metropolitan Sunbelt and coastal markets, which offer several growth levers like high employment and strong spending power. Given a healthy retail real estate environment in the third quarter, the company is likely to have witnessed decent demand for its properties, boosting its quarterly performance.
Led by a healthy mix of essential, necessity-based tenants and omnichannel retailers, this retail REIT enjoys a diverse tenant base. This is likely to have aided stable revenue generation during the to-be-reported quarter, driving top-line growth.
As the mixed-use segment continues to gain from the recovery in the apartment and retail sectors, Kimco’s focus on developing mixed-use assets clustered in strong economic metropolitan statistical areas is likely to have given it an edge by driving net asset value.
The company’s solid balance sheet position is likely to have supported its growth endeavors.
However, high interest expenses are anticipated to have cast a pall on Kimco’s performance to some extent during the quarter.
Projections for KIM
The company’s top line is expected to have improved due to these tailwinds. The Zacks Consensus Estimate for KIM’s quarterly revenues stands at $500.9 million, implying 12.3% growth from the prior-year reported number. The consensus mark for revenues from the rental property is currently pegged at $493.7 million, up from $441.8 million in the year-ago period.
We expect KIM’s leased occupancy to decrease 20 basis points sequentially to 96.0% in the to-be-reported quarter. Our estimate for net revenues from rental properties stands at $495.5 million, suggesting a 12.1% increase year over year. We estimate a year-over-year increase of 19.1% in its third-quarter interest expenses.
Before the third-quarter earnings release, the company’s activities were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has remained unrevised at 41 cents in the past month. However, it suggests a year-over-year increase of 2.5%.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict a surprise in terms of FFO per share for Kimco 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.
Kimco currently has an Earnings ESP of 0.00% 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 broader REIT sector — Extra Space Storage EXR and Public Storage PSA — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
Extra Space Storage, scheduled to report quarterly numbers on Oct. 29, has an Earnings ESP of +0.67% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Public Storage is slated to report quarterly numbers on Oct. 30. PSA has an Earnings ESP of +0.26% and carries a Zacks Rank of 3 presently.
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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