Kimco Realty Earnings Scorecard

May.18.11 | About: Kimco Realty (KIM)

Kimco Realty Corp. (NYSE:KIM), a leading real estate investment trust (REIT), reported fiscal 2011 first quarter recurring funds from operations (FFO) of 30 cents per share, which was in line with the Zacks Consensus Estimate. Fund from operations, a widely used metric to gauge the performance of REIT, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

We cover below the results of the recent earnings announcement, as well as the subsequent analyst estimate revisions and the Zacks ratings for the short-term and long-term outlook for the stock.

Earnings Report Review

Kimco Realty reported first quarter 2011 rental revenues of $224.0 million compared with $213.4 million in the year-earlier quarter – an increase of 5.0%. Total revenues for the reported quarter exceeded the Zacks Consensus Estimate of $216.0 million.

Overall occupancy in Kimco Realty's combined shopping center portfolio was 92.8% at the end of the quarter, an increase of 20 bps compared with first quarter 2010. In the U.S. portfolio, occupancy was 92.5% as of March 31, 2011, an increase of 40 bps compared with the year-ago period. Same-store net operating income (cash-basis, excluding lease termination fees and including charges for bad debts) in the U.S. portfolio increased 1.1% year-over-year.

(Read our full coverage on this earnings report: Kimco Reports in Line)

Earnings Estimate Revisions- Overview

Fiscal 2011 earnings estimates have moved up for Kimco Realty since the earnings release, meaning that analysts are bullish about the current fiscal performance of the company. Let's dig into the earnings estimate details.

Agreement of Estimate Revisions

In the last 30 days, fiscal 2011 earnings estimates were raised by five analysts out of 18 covering the stock, while 2 had lowered the same. For fiscal 2012, 2 out of 18 analysts covering the stock have revised their estimates upward, while 2 have lowered it during the same time period. This indicates that the analysts are optimistic about the short-term fiscal year earnings, although on a long-term basis, the analysts are cautious about the performance of the company.

Magnitude of Estimate Revisions

Earnings estimates for fiscal 2011 have remained steady in the last 30 days at $1.20. For fiscal 2011, the company has reiterated its earlier recurring FFO guidance in the range of $1.17 – $1.21 per share.

Management remained encouraged by the ongoing positive signs in the portfolio in terms of an increase in space demand and the consequent effect on net operating income growth and value creation opportunities. For fiscal 2012, earnings estimates have remained stable during the last 30 days at $1.26, which signifies that the analysts are circumspect about the long-term performance of the company.

Moving Forward

The long-term earnings estimate picture for Kimco Realty is neutral. With a geographically diverse portfolio concentrated mostly in high-income, high-growth areas, Kimco Realty is the largest publicly traded owner and operator of neighborhood and community shopping centers in the U.S. The largest tenants of the company include well-capitalized discount retailers that have fared relatively well as U.S. consumers become more price-conscious.

However, Kimco Realty faces stiff competition from other players in the market for the acquisition of properties for its tenants and for other real estate investment opportunities. Consequently, the company has to continually invest in value drivers that act as hedge against competition, which undermines its long-term growth potential.

We maintain our Neutral rating on Kimco Realty, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold' rating, indicating that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months. We also have a Neutral recommendation and a Zacks #3 Rank for CBL & Associates Properties Inc. (NYSE:CBL), one of the competitors of Kimco Realty.

About Earnings Estimate Scorecard

Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings.