Federal Realty Investment Trust
), the retail real estate investment trust (REIT), is back on the
growth track with its strong focus on expansion opportunities in
premium markets, which generates solid rental income and long-term
value creation potential.
Federal Realty bounced back with an earnings surprise in the
first quarter, after posting in-line results in the prior quarter,
thanks to strong core operating portfolio performance. In
particular, the company's first-quarter 2014 FFO per share of
$1.21, surpassed the Zacks Consensus Estimate of $1.19 by 1.7% and
the year-ago quarter figure of $1.14 by 6.1%. Higher revenues and
improved same-store portfolio performance aided the results.
We believe Federal Realty's expansion strategy has strong
potential and promises steady income escalations in the long run.
Moreover, the company's portfolio of high quality shopping centers
along with the diversified tenant base comprising grocery stores
and low-end discount retailers - such as
Bed Bath & Beyond Inc.
The TJX Companies, Inc.
) - position it well for growth.
Although the significant construction pipeline of Federal Realty
promises bright prospects, it increases operational risks and tends
to drag margins in the near term. Additionally, a rise in online
customer purchases continues to be a headwind for the demand of its
To gain deeper insight into Federal Realty, you can refer to our
updated research report, which was issued on Jul 7, 2014.
Over the last 30 days, the Zacks Consensus Estimate for 2014 and
2015 FFO per share remained stable at $4.92 and $5.36 per share,
respectively. The stock currently has a Zacks Rank #2 (Buy).
Stocks that Warrant a Look
Another better-ranked stock in the retail REIT space is
Regency Centers Corporation
), which has the same rank as Federal Realty.
FFO, a widely used metric to gauge the performance of REITs,
are obtained after adding depreciation, amortization and other
non-cash expenses to net income.
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