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Realty Income (O) Q1 AFFO Lags Estimates, Revenues Rise Y/Y

Realty Income Corporation’s O first-quarter 2023 adjusted funds from operations (AFFO) per share of 98 cents missed the Zacks Consensus Estimate of $1.02 per share. The reported figure was in line with the prior-year quarter’s number.

Results reflect better-than-expected revenues in the quarter. The company benefited from expansionary effects and a healthy pipeline of opportunities globally.

Total revenues were $944.4 million, surpassing the Zacks Consensus Estimate of $910.8 million. The top line also rose 17% year over year.

Realty Income noted that it collected all contractual rent across its theater portfolio from January 2023 through April 2023.

Quarter in Detail

In the quarter, same-store rental revenues of $719.7 million from 10,728 properties under lease witnessed a marginal rise from the prior-year period.

The portfolio occupancy of 99% as of Mar 31, 2023, was stable sequentially and improved 40 basis points (bps) year over year. In the quarter, the company achieved a rent recapture rate of 101.7% on re-leasing activity.

During the reported quarter, O invested $1.7 billion in 339 properties and properties under development or expansion.

In the quarter, Realty Income signed a definitive agreement to acquire up to 415 single-tenant convenience store properties located in the United States from EG Group for $1.5 billion through a sale-leaseback transaction, expected to close in the second quarter of 2023.

Balance Sheet

Realty Income exited first-quarter 2023 with $3.1 billion of liquidity. This comprised cash and cash equivalents of $164.6 million and $2.9 billion of availability under its revolving credit facility after deducting $157.5 million in commercial paper borrowings.

Net debt to annualized pro-forma adjusted EBITDAre was 5.4X.

In the first quarter, the company raised $804.4 million from the sale of its common stock at a weighted average price of $63.31 per share, mainly through its At-The-Market program.

2023 Guidance

Realty Income revised its outlook for 2023.

Management now projects 2023 AFFO per share of $3.94-$4.03. The Zacks Consensus Estimate for the same is pegged at $4.10.

Full-year projections assume same-store rent growth of more than 1.25% and occupancy of more than 98%. O expects a full-year acquisition volume of more than $6 billion.

Realty Income Corporation Price, Consensus and EPS Surprise


Realty Income Corporation Price, Consensus and EPS Surprise
Realty Income Corporation Price, Consensus and EPS Surprise

Realty Income Corporation price-consensus-eps-surprise-chart | Realty Income Corporation Quote

Realty Income currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Simon Property Group, Inc.’s SPG first-quarter 2023 FFO per share of $2.74 missed the Zacks Consensus Estimate of $2.80. The figure, however, compared favorably with the year-ago quarter’s $2.70.

SPG’s results reflected better-than-anticipated revenues on healthy leasing activity, and a rise in base rent per square foot and occupancy levels. However, higher operating expenses were worrisome. This retail behemoth also raised its 2023 FFO per share outlook and dividend.

Kimco Realty Corp.’s KIM first-quarter 2023 FFO per share came in at 39 cents, meeting the Zacks Consensus Estimate. The figure was in line with the year-ago quarter’s number and our estimate.

KIM's results reflected better-than-anticipated revenues, aided by rental rate growth and a rise in occupancy. It revised its 2023 FFO per share outlook.

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

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