Simon Property Group’s SPG fourth-quarter and full-year 2022 results are scheduled to be released on Feb 6 after the closing bell. The company’s quarterly results are likely to exhibit year-over-year 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 1.37% in terms of FFO per share. The quarterly results reflected healthy operating performance and growth in occupancy levels. The retail REIT behemoth also raised the 2022 FFO per share outlook based on the quarterly results.
In the last four quarters, the company beat the Zacks Consensus Estimate on each occasion, the average surprise being 3.05%. This is depicted in the graph below:
Simon Property Group, Inc. Price and EPS Surprise
Simon Property Group, Inc. price-eps-surprise | Simon Property Group, Inc. Quote
Factors at Play
Per a report from CBRE Group CBRE, retail real estate markets remained robust in the fourth quarter, with resilient demand driving the retail availability rate to 4.9% after hitting a high of 6.6% in fourth-quarter 2020.
The core retail sales, excluding motor vehicles, gasoline and auto parts, climbed 7.1% from the prior-year period. The non-store retail sales, which include e-commerce, grew 11.3% year over year.
The retail asking rent improved 2.5% year over year for the second consecutive quarter to $22.78 per square foot in the fourth quarter. This was primarily driven by strong demand and limited new supply.
Retail space absorption came in at 12.7 million square feet for fourth-quarter 2022, marking the ninth consecutive quarter of positive retail absorption per the CBRE Group report.
Simon Property, too, is anticipated to have benefited from the above-mentioned factors.
The increase in consumers’ preference for in-person shopping experiences following the pandemic downtime has been benefiting retail REITs as retailers continue to rent out more physical store spaces to meet this growing demand. This is likely to have driven demand for SPG’s properties, aiding its fourth-quarter cashflows.
Simon Property’s adoption of an omni-channel strategy and successful tie-ups with premium retailers are likely to have paid off well. In November, SPG announced that Leap, the retail platform for modern brands, would open numerous stores at its properties. The move is expected to help many digitally native brands to strategically expand as omnichannel retailers.
Further, its efforts to explore the mixed-use development option, which has gained immense popularity in recent years, is anticipated to have enabled it to tap the growth opportunities in areas where people prefer to live, work and play. In November, Nobu Hospitality and Simon Property celebrated the opening of Nobu Hotel & Restaurant Atlanta at the mixed-use development — Phipps Plaza — in Buckhead.
The Zacks Consensus Estimate for fourth-quarter lease income is pegged at $1.26 billion, up from $1.23 billion reported in the year-ago quarter. The consensus mark for management fees and other revenues is $28.79 million, up 2.5% from the prior-year quarter’s reported figure. In addition, the consensus estimate for quarterly revenues is presently pegged at $1.37 billion, indicating an increase of 3.1% year over year.
On the acquisition front, in December 2022, Simon Property closed its earlier announced strategic partnership with Jamestown, wherein the former acquired a 50% interest in the latter from its founding partners. Through the partnership, SPG will be able to drive its future densification projects with the help of Jamestown’s platform, making the buyout a strategic fit.
However, increasing interest expenses might have been a deterrent for Simon Property during the quarter.
The Zacks Consensus Estimate for FFO per share has been unchanged over the past month at $3.14. Nonetheless, the figure indicates a rise of 1.6% year over year.
For 2022, Simon Property projected FFO per share in the range of $11.83-$11.88.
For the full year, the Zacks Consensus Estimate for FFO per share has been unchanged at $11.68 over the past month. The figure indicates a fall of 2.2% year over year on revenues of $5.24 billion.
Our proven model does not conclusively predict a surprise in terms of FFO per share for SPG this season. The combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that’s not the case here.
Earnings ESP: Simon Property has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: SPG currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.
Stocks That Warrant a Look
Here are some other stocks that are worth considering from the retail REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:
Federal Realty Investment Trust FRT is scheduled to report quarterly figures on Feb 8. FRT has an Earnings ESP of +0.32% and a Zacks Rank of 3 currently.
Regency Centers REG is slated to report quarterly numbers on Feb 9. REG has an Earnings ESP of +0.47% and carries a Zacks Rank of 3.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Note: Anything related to earnings presented in this write-up represent FFO — a widely used metric to gauge the performance of REITs.
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