Yahoo Finance Here's Why Kimco Realty's (KIM) Shares Jumped 22.8% QTD
Shares of Kimco Realty KIM have gained 22.8% in the quarter-to-date period compared with its industry’s rally of 19.6%.
This Jericho, NY-based retail real estate investment trust (REIT) has well-located properties, which are predominantly grocery-anchored, in the drivable first-ring suburbs of its top major metropolitan Sunbelt and coastal markets. These markets offer several growth levers like high employment and strong spending power, poising Kimco well for growth.
It reported third-quarter 2022 funds from operations (FFO) per share of 41 cents, surpassing the Zacks Consensus Estimate of 39 cents. The figure grew 28.1% from the year-ago quarter.
The quarterly results reflected year-over-year growth in the top line. The rise in occupancy levels and rental rate growth aided Kimco’s performance.
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Let us decipher the factors behind the surge in the stock price.
Improving Leasing Environment: The increase in consumers’ preference for in-person shopping experience following the pandemic downtime has been driving the recovery in the retail real estate industry. Retailers continue to rent out more physical store spaces to meet this growing demand. As a result, Kimco’s portfolio of neighborhood and community shopping centers in the United States has been experiencing healthy leasing activity.
For the nine months ended Sep 30, 2022, it executed 1,294 leases aggregating more than 8.3 million square feet. This comprised 397 new leases and 897 renewals and options.
Healthy Operating Performance: A large portion of Kimco’s portfolio comprises grocery-anchored centers that offer essential goods and services. This segment generated 81% of Kimco’s annual base rent in the third quarter of 2022 and aided the company’s occupancy growth, leasing activity and continuation of positive leasing spreads.
The company’s pro-rata portfolio occupancy at the end of the third quarter was 95.3%, reflecting an expansion of 120 basis points (bps) year over year.
KIM’s blended pro-rata rental-rate spreads on comparable spaces increased 7.5%, with rental rates for new leases growing 16.5% and renewals and options rising 6.2% for the third quarter.
Focus on Mixed-Use Assets: Kimco has been focusing on its mixed-use assets clustered in strong economic metropolitan statistical areas that serve the last mile. This segment is gaining from the recovery in both the apartment and retail sectors. Through a selected collection of mixed-use projects, redevelopments and active investment management, KIM has been targeting to increase its net asset value.
Acquisitions & Development Initiatives: To enhance its overall portfolio quality, Kimco has been focusing on various acquisitions and development activities. This November, it acquired a private, multi-generationally-owned portfolio of eight shopping centers in Long Island, NY, for $375.8 million.
The buyout boosts Kimco’s presence in the high barrier-to-entry market of New York. Moreover, the company is expected to capitalize on the highly captive consumer base with some of the best demographic profiles in the country that Long Island’s ultra-infill markets have to offer.
In addition, Kimco’s active development and redevelopment pipeline is encouraging.
Balance Sheet Strength: The company maintains a solid balance-sheet position with ample liquidity. It exited third-quarter 2022 with $2 billion of immediate liquidity and a net debt to EBITDA of 5.9X. KIM also enjoys investment-grade credit ratings of BBB+ from S&P Global Ratings and Baa1 from Moody’s, giving it favorable access to the debt market.
Its well-laddered debt maturity schedule and strong financial flexibility have positioned it well to capitalize on long-term growth opportunities.
Dividends: Solid dividend payouts remain the biggest enticement for REIT investors, and KIM has remained committed to that. Concurrent with its third-quarter earnings release on Oct 27, 2022, KIM increased its dividend payment from 22 cents per share paid out earlier to 23 cents. This represents a 4.5% sequential rise from the prior dividend payment and a 35.3% increase year over year. Such efforts boost investors’ confidence in the stock.
FFO Growth: Kimco’s management raised the outlook for 2022 FFO per share. It now projects the same in the range of $1.57-$1.59, up from the prior outlook of $1.54-$1.57.
Analysts, too, seem bullish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for the 2022 FFO per share, which is currently pegged at $1.58, implies a rise of 14.49% for 2022 compared with the industry’s average of 8.49%.
Stocks to Consider
Some better-ranked stocks from the retail REIT sector are Regency Centers REG, Tanger Factory Outlet Centers SKT and American Assets Trust AAT, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Regency Centers’ current-year FFO per share is currently pegged at $3.99.
The Zacks Consensus Estimate for Tanger Factory Outlet Centers’ ongoing year’s FFO per share has presently stands at $1.81.
The Zacks Consensus Estimate for American Assets Trust’s 2022 FFO per share is pegged at $2.32, presently.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Kimco Realty Corporation (KIM) : Free Stock Analysis Report
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