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Should You Hold On to Kimco Realty (KIM) Stock for Now?

Kimco Realty Corp. KIM, the owner and operator of open-air, shopping centers and mixed-use assets, enjoys the ownership of high-quality assets, concentrated in the top 20 major metro markets, which offer several growth levers.

Further, having a grocery component has been the saving grace of retail REITs in these uncertain times, and 77.6% of Kimco’s annual base rent comes from grocery-anchored centers. With a well-located and largely grocery-anchored portfolio that offers essential goods and services, rent-collection figures remain healthy.

Moreover, apart from having a focus on grocery and home-improvement tenants, the company emphasizes on mixed-use assets clustered in strong economic MSAs. The company is specifically targeting increase in net asset value through a selected collection of mixed-use projects, redevelopments and active investment management.

In addition, retailers are utilizing these last-mile stores as indispensable fulfilment and distribution centers to serve the dense population close by, and outperform pure e-commerce players on delivery times and cost efficiency. Further, curbside pick-up, combined with click-and-collect options, are likely to continue gaining attention amid the current environment and even in the post-Covid era, and the company is focused to capitalize on these trends. Such efforts are likely to boost the competitive advantage.

Kimco has been making efforts to bolster its financial flexibility to tide through the current challenging environment. The retail REIT had $2.3 billion of immediate liquidity at the end of fourth-quarter 2020. Apart from this, the company has 320 unencumbered assets, which represents roughly around 80% of its properties and 85% of its total net operating income (NOI). Notably, Kimco’s consolidated weighted-average debt maturity profile is 10.9 years, one of the longest in the REIT industry, owing to its decent balance-sheet management so far and the company’s near-term debt maturities seem manageable.

In addition, shares of Kimco have gained 20% in three months’ time, outperforming its industry’s increase of 11.1%.



However, retail REITs, including Kimco, Simon Property Group SPG, Macerich MAC, Federal Realty FRT and several others, which have already been battling store closure and bankruptcy issues, are feeling the brunt because of lower footfall due to social-distancing requirements and higher e-commerce adoption due to the coronavirus crisis.

Furthermore, though rent collections from essential retail tenants’ categories have been healthy, receipts from other retail services and restaurant tenants still remain subdued. Given the current environment, this turbulence is likely to prevail in the near term.

Finally, the recent trend in estimate revisions does not indicate a favorable outlook as the Zacks Consensus Estimate for 2021 funds from operations (FFO) per share has witnessed a marginal downward revision over the past month. Given the above-mentioned concerns and downward estimate revisions, Kimco has a limited upside potential for the near term.

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

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