Here's How Simon Property (SPG) Is Placed Ahead of Q1 Earnings

·5-min read

Simon Property Group’s SPG first-quarter 2022 results are scheduled to be out on May 9 after market close. The company’s quarterly results are likely to display growth in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Indianapolis, IN-based retail real estate investment trust (REIT) delivered a surprise of 7.29% in terms of FFO per share. This performance was backed by occupancy and NOI growth.

In the last four quarters, the company beat the Zacks Consensus Estimate on each occasion, the average surprise being 16.86%. This is depicted in the graph below:

Simon Property Group, Inc. Price and EPS Surprise

Simon Property Group, Inc. Price and EPS Surprise
Simon Property Group, Inc. Price and EPS Surprise

Simon Property Group, Inc. price-eps-surprise | Simon Property Group, Inc. Quote

Let’s see how things have shaped up before this announcement.

Factors at Play

The retail real estate market continued to recover in the first quarter despite its set of challenges, with rising rents and a lower overall availability rate.

Per a report from CBRE Group, total retail sales increased 12.8% year over year to $2 trillion in the first quarter, with in-store retail sales displaying higher growth than e-commerce retail sales. The overall net absorption almost doubled year over year to 32 million square feet in the first quarter, marking the sixth consecutive quarter of positive demand.

Availability is also at its lowest mark in at least a decade. The overall retail availability rate was 5.3% in the March-end quarter, contracting 40 basis points quarter over quarter and 1.2 percentage points year over year. Also, there is tightness in the market, with limited new retail supply. Total construction completions decreased to 5.3 million square feet in the first quarter, which marks the second-lowest quarterly total in the past decade.

The average asking rent improved by 2.2% year over year in the first quarter to $22.17 per square foot, which marks the highest annual rate since the first quarter of 2017.

Simon Property is anticipated to have benefited from the recovery in the retail real estate market. This retail REIT behemoth has wide exposure to different retail assets, including premium malls, lifestyle centers and other retail properties across the United States.

With the resumption of the economy and an improving leasing environment, Simon Property is likely to have benefited from its superior assets in premium locations. As such, Simon Property is expected to have witnessed growth in its earnings and cash flow during the quarter under consideration.

Further, the adoption of an omnichannel strategy and successful tie-ups with premium retailers have been Simon Property’s key focus. This retail REIT has also been tapping growth opportunities by assisting digital brands to enhance their brick-and-mortar presence. The company capitalized on buying out recognized retail brands in bankruptcy. With brands generating a decent amount from digital sales, investments in the same seem strategic for SPG. Also, the company is anticipated to have maintained its decent financial strength during the March-end quarter.

The Zacks Consensus Estimate for first-quarter lease income is pegged at $1.21 billion, up from the year-ago period’s $1.14 billion. In addition, the consensus mark for quarterly revenues currently stands at $1.32 billion, suggesting an increase of 6.3% year over year.

Simon Property’s activities during the January-March quarter were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for FFO per share has moved a cent south in the past week and currently stands at $2.73. However, the figure calls for 10.1% growth from the year-earlier period.

Here Is What Our Quantitative Model Predicts:

Our proven model predicts a surprise in terms of FFO per share for Simon Property this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is the case here.

Simon Property currently carries a Zacks Rank of 3 and has an Earnings ESP of +1.24%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Retail REITs

Federal Realty Investment Trust’s FRT first-quarter 2022 FFO per share of $1.50 surpassed the Zacks Consensus Estimate of $1.44. This also compared favorably with the year-ago quarter’s tally of $1.17. Federal Realty’s results reflected better-than-anticipated revenues. This retail REIT also raised its guidance for 2022 FFO per share.

FRT’s quarterly revenues of $256.8 million topped the consensus mark of $251.8 million and improved by 17.7% from the year-ago quarter’s tally.

Realty Income Corporation’s O first-quarter 2022 adjusted FFO per share of 98 cents marginally surpassed the Zacks Consensus Estimate of 97 cents. The reported figure increased 14% from the prior-year quarter’s 86 cents. Results reflected a better-than-expected improvement in revenues. Realty Income benefited from expansionary effects and a healthy pipeline of opportunities globally.

Realty Income’s total revenues in the reported quarter came in at $807.3 million, exceeding the Zacks Consensus Estimate of $761.2 million. O’s top line also jumped 82.5% year over year.

Kimco Realty Corp.’s KIM first-quarter 2022 NAREIT FFO per share came in at 39 cents, surpassing the Zacks Consensus Estimate of 37 cents. This figure also grew 18.2% from the year-ago quarter. Results reflected better-than-anticipated revenues. Kimco also issued a revised 2022 FFO outlook.

KIM generated revenues of $427.2 million, beating the consensus mark of $422.2 million. Quarterly revenues jumped 51.3% year over year.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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