What's in the Offing for Kimco Realty (KIM) in Q3 Earnings?

Kimco Realty CorporationKIM is slated to report third-quarter 2017 results on Oct 25, after the market closes . Both its revenues and funds from operations (FFO) per share are anticipatedto be up year over year.

Last quarter, this New Hyde Park, NY-based retail real estate investment trust (REIT) reported in-line results with respect to FFO per share. The company also recorded the strongest leasing volume in the past decade.

Over the trailing four quarters, Kimco beat estimates in one occasion and posted in-line results in the other three, recording an average beat of 30.9%. The graph below depicts this surprise history:

Kimco Realty Corporation Price and EPS Surprise

Kimco Realty Corporation Price and EPS Surprise | Kimco Realty Corporation Quote

However, the stock has lost 23.7% year to date versus the industry 's loss of 4%.

Note: All EPS numbers presented here represent funds from operations (FFO) per share.

Factors to Influence Q3 Results

Kimco has been taking long strides and is progressing well with its strategic 2020 Vision. The company has been purchasing premium assets in key U.S. markets and carrying out joint-venture buyouts. Its efforts included exit from Canada as well as exodus from secondary markets.

In fact, in July, Kimco announced the purchase of Jantzen Beach Center for $131.8 million. This is the company's eighth property in the Portland-Vancouver-Hillsboro MSA. The move comes as part of Kimco's strategic 2020 Vision that envisages portfolio-quality upgrade with premium acquisitions in selective locations, financed by proceeds reaped from dispositions.

Further, the company is engaged in the execution of strategic measures to boost the capital structure, and enhance its growth profile and tax efficiency.

However, the increasing number of retailers jumping on the dot-com bandwagon has created pressure on the top-line figure for this REIT. A number ofretailers are filing for bankruptcy and opting for store closures, as mall traffic has been shrinking due to the soaring online purchases. Although retail REITs like Kimco are actively enhancing the omni-channel capabilities and heavily investing in redevelopment to draw customers, it may take a while for these efforts to offset the dent created in the operating results.

Furthermore, as part of its portfolio upgrade strategy, Kimco is aggressively disposing non-core assets. While such efforts are encouraging for the long term, the earnings dilution led by high disposition activity cannot be averted in the near term. Therefore, these moves are expected to hurt the company's growth momentum in the to-be-reported quarter.

Kimco's activities during the quarter could not gain adequate analyst confidence. Consequently, the Zacks Consensus Estimate for funds from operations for the third quarter remained unchanged at 38 cents, over the past month.

Earnings Whispers

Our proven model does not conclusively show that Kimco will likely beat estimates this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. However, that is not the case here as you will see below.

(You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .)

Zacks ESP: The Earnings ESP for Kimco is 0.00%.

Zacks Rank: Kimco currently has a Zacks Rank #3, which increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

Stocks That Warrant a Look

Here are a few stocks in the REIT space that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this time around:

The Macerich Company MAC , scheduled to release earnings on Oct 30, has an Earnings ESP of +1.58% and a Zacks Rank of 3. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

CBL & Associates Properties, Inc. CBL , expected to release third-quarter results around Nov 2, has an Earnings ESP of +0.93% and a Zacks Rank of 3.

Agree Realty Corporation ADC , slated to release earnings on Oct 23, has an Earnings ESP of +3.2% and a Zacks Rank of 3.

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.

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

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

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