On Nov 14, 2013, we reaffirmed our Neutral recommendation on
retail real estate investment trust (REIT)
Kimco Realty Corporation
). The decision was based on its progress in portfolio
restructuring, easy access to capital, improved guidance and
dividend hike. Yet, the near-term diluting effect from
portfolio pruning and short-term headwinds for occupancy amid an
unsettled economic environment remain our concerns.
Kimco's third-quarter 2013 earnings came in at 33 cents per
share, in line with Zacks Consensus Estimate. However, results
surpassed the prior-year quarter figure by a 6.5%. Quarterly
results were driven by decent performance of its operating
portfolio supported by improved leasing activity and strategic
portfolio repositioning measures.
Kimco also raised the lower end of its previously issued
full-year 2013 adjusted FFO per share guidance. It now expects
FFO in the range of $1.32-$1.33 (prior range being $1.31-$1.33).
Further, the company announced a quarterly cash dividend of 22.5
cents per share on its common stock, reflecting a 7.1% hike from
the prior quarter.
For Kimco, over the last 30 days, the Zacks Consensus Estimate
for 2013 remained unchanged at $1.33 and for 2014 it advanced
0.72% to $1.34. Therefore, the stock currently carries a Zacks
Rank #3 (Hold).
With premium properties in high-income, high-growth areas, Kimco
is a one of the leading publicly traded owner and operator of
neighborhood and community shopping centers in the U.S.
Moreover, the company has achieved significant diversification
through geographic distribution of its properties, avoiding
dependence on any single property, and a large tenant base.
Currently, Kimco intends to concentrate its future investments on
the neighborhood and community shopping center segment, primarily
focusing on the North American market. It is well on track to
improve its business operations and is shedding its non-retail
assets and investments as well as non-strategic retail
In recent times, the company has aggressively pruned its Latin
American portfolio and redeployed the proceeds to acquire high
quality U.S. shopping center assets in its key markets, with
demographics and household income levels higher than the national
AMER ASSETS TR (AAT): Free Stock Analysis
CEDAR SHOPN CTR (CDR): Free Stock Analysis
GENL GRWTH PPTY (GGP): Free Stock Analysis
KIMCO REALTY CO (KIM): Free Stock Analysis
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Nevertheless, we notice that though the economy is reviving, the
pace is slow. Therefore, we anticipate only a modest rate of
growth of market rent, occupancy levels and leasing spreads.
Moreover, though the sale of non-retail and non-strategic retail
assets is expected to help increase Kimco's long-term
profitability, the move is likely to adversely affect its
earnings in the near term. Further, a rise in internet sales
tends to lessen the demand for retail space.
Other Stocks to Consider
Better placed REITs in Equity Trust - Retail include
American Assets Trust, Inc.
Cedar Realty Trust, Inc
General Growth Properties, Inc
). All these stocks carry a Zacks Rank #2 (Buy).
Funds from operations, a widely accepted and reported measure
of REITs performance, are derived by adding depreciation,
amortization and other non-cash expenses to net income.