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Here's Why You Should Retain Kimco Realty (KIM) Stock Now

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·3-min read
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Kimco Realty KIM is well-poised to gain from its grocery-anchored properties that offer essential goods and services and mixed-use assets clustered in strong economic metropolitan statistical areas (MSAs) that serve the last mile. It is one of the major owners and operators of neighborhood and community shopping centers in the United States.

Kimco’s properties are mainly located in the drivable first-ring suburbs of its top major metropolitan Sunbelt and coastal markets, which offer several growth levers. The top major metro markets contribute 85% of the annual base rent. In addition, the acquisition of the grocery-anchored shopping center owner — Weingarten Realty Investors — has benefited Kimco in terms of increased scale, density in the key Sun Belt markets and a broader redevelopment pipeline.

The grocery-anchored centers, which accounted for 80% of the company’s annual base rent in first-quarter 2022, had been the key surviving component during the pandemic. A well-located grocery-anchored portfolio that offers essential goods and services has helped Kimco witness increased occupancy, strong leasing activity and positive leasing spreads during the first quarter. It signed 653 leases, aggregating 4.7 million square feet during the quarter. This trend is likely to continue in the near term, thereby ensuring a steady stream of cashflows.

Further, Kimco’s mixed-use assets category is gaining from the recovery in both the apartment and retail sectors. Particularly, KIM is targeting an increase in net asset value through a selected collection of mixed-use projects, redevelopments and active investment management. Additionally, retailers are opting for these last-mile stores as indispensable fulfillment and distribution centers to serve the dense nearby population. This has considerably reduced the delivery time and enhanced the cost-efficiency compared to the pure e-commerce players.

Kimco also enjoys a robust balance-sheet position and holds abundant financial flexibility. It had more than $2.4 billion of immediate liquidity available at the end of the first quarter, including full availability under its $2-billion unsecured revolving credit facility.

However, over the recent years, the adoption of e-commerce by consumers has lowered the demand for the retail real estate space. With more and more consumers preferring online shopping, the demand for physical stores has taken a backfoot and competition has intensified. Owing to this, retailers are either opting for store closures or filing for bankruptcies, adding to Kimco’s concerns.

Also, a hike in interest rates might raise borrowing costs for the company, which would affect its ability to purchase or develop real estate. Its total consolidated debt as of Mar 31, 2022, was approximately $7.5 billion.

Nevertheless, analysts seem to be bullish about this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for the company’s 2022 funds from operations (FFO) per share has been revised upward by 1.3% over the past two months to $1.53.

Shares of Kimco have declined 19.1% over the past three months compared with the industry’s fall of 16.6%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks from the REIT sector are Prologis PLD, OUTFRONT Media OUT and SITE Centers Corp. SITC

The Zacks Consensus Estimate for Prologis’ ongoing year’s FFO per share has been raised 1.8% over the past two months to $5.15. PLD carries a Zacks Rank #2 (Buy), currently.

The Zacks Consensus Estimate for OUTFRONT Media’s current-year FFO per share has moved 51.5% northward in the past two months to $2.09. OUT carries a Zacks Rank of 2 at present.

The Zacks Consensus Estimate for SITE Centers Corp.’s 2022 FFO per share has moved 1.8% upward in the past two months to $1.14. SITC presently carries a Zacks Rank #2.

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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