Regency Centers Corp. (REG Quick Quote – ) is scheduled to report fourth quarter and full year 2021 results on Feb. 10 after the close of trading. The company's quarterly results are likely to show increases in revenue per share and funds from operations (FFO).
In the last reported quarter, the Jacksonville, Florida-based retail real estate investment trust (REIT) reported a negative surprise of 2.04% per share of NAREIT FFO.
The company has beaten the Zacks Consensus Estimate three times in the last four quarters and has not reached the same level in the remaining quarter. On average, it has surprised by 10.70% in the last four quarters. As shown in the chart below.
Let's see how things were before this announcement.
Factors to be aware of
According to a CBRE Group report, total retail sales increased 16.9% year-over-year in the fourth quarter, reflecting the strong momentum of the 2021 holiday shopping season. The fourth quarter was the fifth consecutive quarter of positive retail absorption (+20.6 million sq. m.) feet). In addition, average asking prices increased 1.6% year-over-year to $21.87 per square foot in the fourth quarter as prime locations became scarce.
Overall retail availability declined 30 basis points to a 10-year low of 5.6 percent in the quarter ended December. New construction deliveries remained low in the fourth quarter, with 2021 deliveries down 36 percent to 23.5 million square feet. The scarcity of new prime locations is driving occupancy and contributing to rental growth.
Regency is also expected to benefit from the recovery of the retail real estate market. It has a portfolio of high-quality open-air shopping centers, 80% of which are grocery-driven neighborhoods and community centers. These properties are located near affluent suburbs and urban trade areas with high consumer spending power, enabling the company to attract top grocery stores and retailers. In addition, owning the grocery portion of a retail REIT has been a strength in the pandemic to date, and Regency has a number of industry-leading grocers on its tenant roster.
The company's central and important underlying retail business kept its properties open and operating throughout the pandemic. The retail REIT noted in its November investor update that traffic to the REG portfolio returns to 100 percent of 2019 traffic levels by the end of October 2021.
With widespread vaccinations and an improving economy, retail sales are increasing. In turn, this may drive demand for retail real estate space and reduce pressure on retail landlords, thereby supporting Regency's rental income figures for the quarter under consideration.
In addition, Regency witnessed solid inorganic growth in the fourth quarter of 2021. On a wholly-owned basis, REG completed acquisitions totaling $311 million. For the full year, Regency completed acquisitions of Regency shares totaling $489 million at a blended cap rate of 5.1%.
In terms of disposition activity, Regency sold two properties for a total of $87 million in the fourth quarter for Regency's share. For the full year, REG completed a combined $279 million of dispositions for Regency's share. Excluding non-revenue producing properties, the blended cap rate was 5.2%.
The Zacks Consensus Estimate for fourth quarter revenue is $297.1 million, up 14.95% from the figure reported in the same quarter last year.
Regency's activity in the October-December quarter was enough to earn analyst confidence. The Zacks Consensus Estimate for FFO per share has moved north 2 cents in the last two months and is fixed at 96 cents. The figure also calls for a 26.3% increase over the figure reported in the year-ago quarter.
Regency expects 2021 NAREIT FFO earnings per share in the range of $3.93 to $3.97. REG is guiding for peer group net operating income (excluding termination fees) in the range of 15.5 to 16.5%.
For the full year, the Zacks Consensus Estimate for FFO per share has risen 2.8% to $3.97 in the last two months. The figure represents revenue of $1.19 billion, up 34.6% year-over-year.
This is what our quantitative model predicts
Our proven model predicts a surprising per-share FFO for Regency this season. The combination of a positive and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is the case here.
Regency currently has an Earnings ESP of +0.67% and a Zacks Rank of 3. You can find the best stocks before they are reported using our .
Other stocks worth looking at
Here are three stocks from the retail REIT sector – Agree Realty Corporation (ADC Quick Quote – ), Brixmor Property Group Inc. (BRX Quick Quote – ) and STORE Capital Corporation (STOR Quick Quote – ) – you may want to consider them as our model shows that the right combination of these elements reported a surprise this quarter.
Agree Realty Corporation is scheduled to release its Q4 earnings on February 22nd, and its Earnings ESP is +1.26% with a current Zacks Rank of 3. As you can see.
Brixmor Property Group, which is scheduled to report quarterly data on February 7, has an Earnings ESP of +0.82% and a Zacks Rank of 2.
STORE Capital is scheduled to release its quarterly data on February 23, and its Earnings ESP is +1.45% with a Zacks Rank of 3.
Stay informed of upcoming earnings announcements.
Note: Anything related to earnings in this article represents funds from operations (FFO) – a widely used metric for measuring the performance of REITs.