On Apr 5, 2013, we reiterated our long-term recommendation on
Kimco Realty Corp.
) at Neutral. This reflects the company's strong fundamentals and
strategic portfolio repositioning efforts that offer an enticing
upside potential going forward.
Kimco is a leading publicly traded owner and operator of premium
neighborhood and community shopping centers, with properties in
high-income, high-growth areas of the U.S. The company has
achieved significant diversification through the geographic
distribution of its properties and a large tenant base. This
diversification helps limit its operating and leasing risks and
provides a strong upside potential for the top-line growth of the
Kimco boasts a tenants base comprising various industry leading
giants such as
The Home Depot, Inc.
Bed Bath & Beyond Inc.
Notably, Kimco generally signs long-term leases with the high
credit tenants, which limits the downside risk and provides a
steady source of income. Moreover, the company is well on track
on improving its core business operations.
As part of this effort, it is shedding off its non-retail
assets and investments as well as non-strategic retail assets and
aggressively using this capital for developing its core business.
Such moves augur well and are expected to add to the company's
profitability going forward.
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On Feb 5, Kimco reported an adjusted FFO (funds from operations)
per share of 33 cents, beating the Zacks Consensus Estimate by 2
cents and the year-ago quarter figure by 3 cents. For full year
2012, the company's adjusted FFO per share came in at $1.26, a
cent ahead of the Zacks Consensus Estimate of $1.25 and 6 cents
above the prior-year figure of $1.20 per share. The results were
aided by better-than expected growth in revenue.
However, owing to its international presence, Kimco often faces
unfavorable foreign currency movements, which impacts the
top-line growth of the company. Additionally, stiff competition
from other players in the market undermines its growth potential
to some extent.
Following the release of the fourth-quarter and full-year 2012
results, the Zacks Consensus Estimate for full year 2013 moved
down 0.7% to $1.31 per share in the last 60 days. Also, the Zacks
Consensus Estimate for full-year 2014 dipped 0.7% to $1.37 per
share in the last 60 days. With the Zacks Consensus Estimates
moving down for both full year 2013 and 2014, Kimco now has a
Zacks Rank #3 (Hold).
Other Stocks to Consider
REITs that are currently performing better than Kimco include
Mack-Cali Realty Corp.
), which carries a Zacks Rank #2 (Buy).
Note: FFO, 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.