Zacks_Analysts' Blog : Earnings Scorecard: Kimco Realty - Analyst Blog

Kimco Realty Corp. (KIM), a leading real estate investment trust (REIT), reported fiscal 2011 third quarter recurring funds from operations (FFO) of 30 cents per share, which was in line with the Zacks Consensus Estimate. Funds 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 reported third quarter 2011 rental revenues of $216.1 million compared with $207.2 million in the year-earlier quarter – an increase of 4.3%. Total revenues for the reported quarter, however, missed the Zacks Consensus Estimate of $220.0 million.

Overall occupancy in Kimco’s combined shopping center portfolio was 93.0% at the end of the quarter, an increase of 10 bps compared with third quarter 2010. In the U.S. portfolio, occupancy was 92.9% as of September 30, 2011, an increase of 50 bps compared with the year-ago period. Same-store net operating income in the combined portfolio increased 3.3% year-over-year.

(Read our full coverage on this earnings report:  Kimco Reports Strong, Ups Dividend)

Earnings Estimate Revisions - Overview

Fiscal earnings estimates have moved in both directions since the earnings release, meaning that the earnings expectations remain a mixed bag for Kimco. Let’s dig into the earnings estimate details.

Agreement of Estimate Revisions

In the last 7 days, fiscal 2011 earnings estimates were raised by 1 analyst out of 12 covering the stock, while none had lowered the same. For fiscal 2012, 4 out of 14 analysts covering the stock have revised their estimates down, while none have increased it during the same time period. This indicates that the analysts are bullish about the short-term fiscal year earnings, although on a long-term basis, fiscal earnings are skewed in the negative direction.

Magnitude of Estimate Revisions

Earnings estimates for fiscal 2011 have increased by a penny in the last 7 days to $1.19. For fiscal 2011, Kimco has narrowed its recurring FFO guidance from the earlier range of $1.17 – $1.21 per share to $1.19 – $1.20. In the last 7 days, earnings estimates for fiscal 2012 have dipped by a penny to $1.25, while Kimco expects recurring FFO in the range of $1.22 – $1.26. The midpoint of the 2012 initial guidance range of Kimco denotes about 4% increase in recurring FFO per share on a year-over-year basis.

Moving Forward

The long-term earnings estimate picture for Kimco is neutral. With a geographically diverse portfolio concentrated mostly in high-income, high-growth areas,Kimco is the largest publicly traded owner and operator of neighborhood and community shopping centers in the U.S. Currently, Kimco remains committed to recycling capital from the sale of retail assets deemed non-strategic and monetizing the non-retail assets, while strengthening its balance sheet metrics.

However, incessant fears of a double-dip recession have resulted in increased tenant bankruptcies, which in turn have led to a decline in occupancy and an increase in vacancy rates. This has negatively affected the top-line growth of the company.

We maintain our ‘Neutral’ rating on Kimco, 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. (CBL), one of the competitors of Kimco.

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 at http://www.zacks.com/education/