Why Is Simon Property (SPG) Down 3.9% Since Last Earnings Report?

It has been about a month since the last earnings report for Simon Property (SPG). Shares have lost about 3.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Simon Property due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Simon Property Beats on Q3 FFO, Ups '21 View, Hikes Dividend

Simon Property’s third-quarter 2021 FFO per share of $3.13 handily exceeded the Zacks Consensus Estimate of $2.47.

This performance was backed by better-than-expected top-line growth. The retail REIT behemoth also raised the 2021 FFO per share outlook based on its results in the year so far and expectations for the rest of the year. It also announced a hike in the quarterly dividend.

According to David Simon, chairman, chief executive officer and president, "Demand for our space from a broad spectrum of tenants is growing.  Occupancy gains continued, retailer sales accelerated, including our owned brands, and cash flow increased.”

The company generated revenues of $1.29 billion during the quarter, surpassing the Zacks Consensus Estimate of $1.23 billion.

The quarterly FFO per share also compares favorably with the year-ago figure of $2.05, and revenues increased 22.2%, year on year.

Inside the Headline Numbers

For the U.S. Malls and Premium Outlets portfolio, occupancy was 92.8% as of Sep 30, 2021, expanding 140 basis points (bps) year on year. Base minimum rent per square feet was $53.91 as of Sep 30, 2021, down 4% year on year.

Domestic property NOI increased 24.5%, year on year. Portfolio NOI, which comprises NOI from domestic properties, international properties and NOI from its investment in Taubman Realty Group, climbed 34.3% from the prior-year period.

Balance Sheet Position

Simon Property exited third-quarter 2021 with $8.0 billion of liquidity. This comprised $1.1 billion of cash on hand, including its share of joint-venture cash, as well as $6.9 billion of available capacity under the company’s revolving credit facilities, net of $500 million outstanding under the U.S. commercial paper program.

Outlook

Simon Property raised the 2021 FFO per share guidance and now projects the same at $11.55-$11.65, up from the $10.70-$10.80 guided earlier. This suggests an increase of 85 cents per share at the mid-point.

Dividend Hike

Simon Property announced a 10% sequential hike in its fourth-quarter 2021 dividend. The company will now pay out $1.65 per share compared with the $1.50 paid out earlier. The increased dividend will be paid out on Dec 31 to its shareholders of record as of Dec 10, 2021.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Simon Property has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Simon Property has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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