On Jul 19, 2013, we reiterated our long-term recommendation on
retail real estate investment trust (REIT)
Regency Centers Corp
) at Neutral. The decision is based on the company's successful
execution of strategic initiatives, opportunistic acquisitions
and significant leasing activity and the slight rise in the 2013
guidance. Yet stiff competition and technological advancements
leading to a rise in online shopping could upset the demand for
Why the Neutral Stance?
Regency Centers is actively spreading its footprint in
high-income and high-barrier markets through the addition of
upscale assets. In addition, the company boasts a cluster of
industry leading grocers such as
Whole Foods Market
The Kroger Co.
) as tenants.
During second-quarter 2013, Regency announced the purchase of
Preston Oaks in Dallas. The company also disclosed its plan to
redevelop an Ore.-based premium shopping center - Greenway Town
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Strategic acquisitions and the inclusion of premium development
and redevelopment projects will boost Regency's portfolio in
infill locations with high occupancy levels and strong tenant
sales and offer ample room for top-line growth going forward. In
tune, Regency has also slightly raised the guidance range for
full-year 2013 based on enhanced same property net operating
income growth projections.
The company has an active development pipeline that increases
operational risks. In addition, stiff competition along with a
rise in customer buyouts through catalogs as well as online
through the Internet, mobile phones and tablets could upset the
demand for Regency's properties.
The Zacks Consensus Estimate for 2013 FFO (funds from operations)
per share moved up marginally to $2.56, while for 2014, it dipped
slightly to $2.64 per share, over the last 60 days.
Regency is scheduled to release its second-quarter 2013 earnings
results after the closing bell on Jul 31. The Zacks Consensus
Estimate for FFO per share for the upcoming quarter is pegged at
64 cents per share. The earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) for Regency Centers is 0.00% for the second quarter. This,
along with its Zacks Rank #3 (Hold), reduces the chances of a
positive earnings surprise.
Other Stocks to Consider
Another retail REIT that is performing better and deserves a look
The Macerich Company
), carrying a Zacks Rank #2 (Buy).
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.