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Here's How Regency (REG) Is Placed Ahead of Q4 Earnings

Regency Centers Corp. REG is slated to report fourth-quarter and full-year 2021 results on Feb 10 after the closing bell. The company’s quarterly results are likely to display growth in both revenues and funds from operations (FFO) per share.

In the last reported quarter, this Jacksonville, FL-based retail real estate investment trust (REIT) reported a negative surprise of 2.04% in terms of NAREIT FFO per share.

In the last four quarters, the company’s earnings exceeded the Zacks Consensus Estimate on three occasions and missed the same in the remaining quarter. It has a trailing four-quarter surprise of 10.70%, on average. This is depicted in the graph below:

Let’s see how things have shaped up before this announcement.

Factors to Note

Per a report from CBRE Group, total retail sales increased 16.9% year over year in the fourth quarter, reflecting the strength of a strong holiday shopping season in 2021. The fourth quarter marked the fifth consecutive quarter of positive retail absorption (+20.6 million square feet). Also, the average asking rent improved 1.6% year over year to $21.87 per square foot in the fourth quarter as prime space grew scarce.

The overall retail availability rate shrunk by 30 basis points in the December-end quarter to a 10-year low of 5.6%. New construction deliveries remained muted in the fourth quarter, with 23.5 million square feet delivered in 2021, down 36% year over year. The scarcity of new prime space has fueled occupancy levels and aided growth in rents.

Regency is also anticipated to have benefited from the recovery in the retail real estate market. It has a high-quality open-air shopping center portfolio with 80% grocery-anchored neighborhood and community centers. The properties are situated in affluent suburban areas and near urban trade areas where consumers have high spending power, enabling the company to attract top grocers and retailers. Further, in the pandemic so far, having a grocery component has been the saving grace for retail REITs and Regency has numerous industry-leading grocers in its tenant roster.

Significant essential retail businesses at the company’s centers enabled its properties to remain open, operating for the entirety of the pandemic. In its November investor update, this retail REIT noted that at the end of October 2021, foot traffic in REG’s portfolio recovered to 100% of 2019 foot traffic levels.

With widespread vaccination and an improvement in the economy, retail sales are increasing. This, in turn, is likely to have driven demand for retail real estate space and lowered pressure on retail landlords, thereby supporting Regency’s rent collection figures in the quarter under consideration.

Moreover, Regency witnessed solid inorganic growth in the fourth quarter of 2021. On a wholly owned basis, REG completed acquisitions worth $311 million in total. During the full year, Regency concluded acquisitions for a total of $489 million at Regency’s share at a 5.1% blended cap rate.

Concerning disposition activities, Regency wrapped up the sale of two properties for a combined total of $87 million at Regency’s share during the fourth quarter. For the full year, REG completed a total of $279 million dispositions on a combined basis at Regency’s share. Excluding non-income producing properties, the blended cap rate was 5.2%.

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $297.1 million, suggesting an increase of 14.95% from the year-ago quarter’s reported figure.

Regency’s activities during the October-December quarter were adequate to gain analyst confidence. The Zacks Consensus Estimate for FFO per share has moved two cents north in the past two months and is pegged at 96 cents. The figure also calls for 26.3% growth from the year-earlier period’s reported figure.

Regency projected 2021 NAREIT FFO per share in the range of $3.93-$3.97. REG guided same-property net operating income (excluding termination fees) in the range of 15.5-16.5%.

For the full year, the Zacks Consensus Estimate for FFO per share has moved 2.8% north to $3.97 over the past two months. The figure indicates a 34.6% increase year over year on revenues of $1.19 billion.

Here Is What Our Quantitative Model Predicts

Our proven model predicts a surprise in terms of FFO per share for Regency this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is the case here.

Regency currently has an Earnings ESP of +0.67% and a Zacks Rank of 3. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Other Stocks That Warrant a Look

Here are three stocks from the retail REIT sector — Agree Realty Corporation ADC, Brixmor Property Group Inc. BRX and STORE Capital Corporation STOR — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.

Agree Realty Corporation, slated to release fourth-quarter earnings on Feb 22, has an Earnings ESP of +1.26% and carries a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Brixmor Property Group, scheduled to report quarterly numbers on Feb 7, has an Earnings ESP of +0.82% and carries a Zacks Rank of 2.

STORE Capital, slated to report quarterly numbers on Feb 23, has an Earnings ESP of +1.45% 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 represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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Regency Centers Corporation (REG): Free Stock Analysis Report
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Brixmor Property Group Inc. (BRX): Free Stock Analysis Report
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