Earnings Preview: Kimco - Analyst Blog

By Zacks Equity Research,

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Kimco Realty Corporation ( KIM ), a real estate investment trust (REIT), is scheduled to report its second quarter 2012 earnings on July 31, 2012 after the closing bell. The current Zacks Consensus Estimate for the second quarter is pegged at 31 cents per share, representing a year-over-year growth of about 1.9%.

First Quarter Recap

Kimco reported total revenue of $231.4 million in first quarter 2012 compared with $225.1 million in the year-earlier quarter - an increase of 2.8%. Total revenue for the reported quarter exceeded the Zacks Consensus Estimate of $228 million.

Kimco reported first quarter 2012 FFO (funds from operations) of $126.2 million or 31 cents per share compared with $122.0 million or 30 cents per share in the year-ago period.  Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Agreement of Analysts

In the last 7 days, one out 14 analysts raised an estimate for  2012 while none revised estimates for  2013. This signifies that the earnings estimates are skewed towards a slightly positive direction.

Magnitude of Estimate Revisions

For full-year 2012, the company expects recurring FFO in the range of $1.22 to $1.26 per share. The Zacks Consensus Estimate for 2012 has remained constant over the last 7 days at $1.24 per share, which is at the higher end of the company's guidance. For 2013, the Zacks Consensus Estimate remained unchanged over the last 7 days at $1.32 per share. 

Our Recommendation

Kimco,  together with its subsidiaries, is the largest publicly traded owner and operator of neighborhood and community shopping centers in the U.S.

Kimco generally signs long-term leases with high-credit tenants, which limits the downside risk and provides a steady source of income. Given the current uncertainty in the capital markets, Kimco has also modified its business strategy to focus on core retail competencies.

The company intends to concentrate its future investments on the neighborhood and community shopping center segment, primarily focusing on the North American market. This provides a strong upside potential for the top-line growth of the company.

However, Kimco faces stiff competition from other players in the market for the acquisition of properties for its tenants and for other real estate investment opportunities. Consequently, the company has to continually invest in value drivers that act as a hedge against competition, which undermines its long-term growth potential. 

Kimco currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Simon Property Group Inc ( SPG ), also holds a Zacks #2 Rank.

KIMCO REALTY CO (KIM): Free Stock Analysis Report
SIMON PROPERTY (SPG): Free Stock Analysis Report
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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: KIM , SPG

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