Simon Property Group Inc. (SPG), a leading real estate investment trust (REIT), reported fiscal 2010 first quarter recurring FFO (funds from operations) of $1.41 per share that well exceeded the Zacks Consensus Estimate of $0.83. Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
Below we will cover the results of the recent earnings announcement, subsequent analyst estimate revisions and Zacks ratings for the short term and long term outlook for the stock.
Earnings Report Review
During first quarter 2010, total revenue of the company increased to $925.1 million from $918.5 million in the year-earlier quarter. Occupancy in the regional malls and premium outlet centers combined portfolio was 92.2% at quarter end, compared to 92.1% in the year-ago period. Comparable sales in the combined portfolio remained unchanged during the quarter at $467 per square foot, compared to the prior year. Average rent per square feet in the combined portfolio increased marginally to $38.72, compared to $37.51 in the year-ago period.
(Read our full coverage on this earnings report: Simon Property Revenue Rises)
Earnings Estimate Revisions – Overview
Estimates haven’t budged for Simon Property since the earnings release, meaning that analysts were generally unmoved by this information. One could say that’s not bad news. But then again, why own a stock that is not benefiting from good news that gives it better odds to rise in the future? Let’s dig into the earnings estimate details.
Agreement of Analysts
Analysts in general, are in consensus about the future outlook for Simon Property’s earnings, as is visible below. Seven analysts have increased their estimates for fiscal 2010, while only 3 have reduced them. For fiscal 2011, the picture is relatively bleak, with 8 analysts raising their earnings estimates and 5 lowering them.
Magnitude of Estimate Revisions
Earnings estimates fell by 2 cents for fiscal 2010 from $5.39 to $5.37 since the earnings announcement. For fiscal 2011, earnings estimates have moved up 2 cents from $6.25 to $6.27. This is encouraging news for the company.
Simon Property in Neutral Lane
Simon Property is the largest publicly traded retail real estate company in North America, with a strong portfolio of assets across almost all retail distribution channels. The company’s international presence gives it a more sustainable long-term growth story than its domestically focused peers. The geographic and product diversity of the company insulates it from market volatility to a great extent and provides a steady source of income.
Furthermore, the company has a strong balance sheet with adequate liquidity. However, increased tenant bankruptcies due to prolonged recession, and reduction in disposable income coupled with relatively lower consumer discretionary spending may weigh on the company’s top and bottom-lines.
Currently, Simon Property shares are maintaining a Zacks #3 Rank, which translates to a short-term Hold recommendation. Our long-term recommendation for the stock also remains middle of the road at Neutral.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/
Read the full analyst report on “SPG”
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