Summary
- Kimco's Q2 earnings demonstrated continued rejuvenation.
- The company is ahead of schedule in executing their vision.
- Based on the financials and conference call, the turnaround is very much intact.
- The market has yet to factor in growth projects beginning to come online in the near future.
Introduction
It is that time again, earnings season. One of my favorite companies Kimco Realty (KIM) reported earnings on July 25th. With this new data out, I thought it might be time to provide a checkup.
Over the past couple of years, KIM has been undergoing a cleansing of their portfolio, focusing on major MSAs, specifically along the coasts. The advantage lies in the fact that they are more densely populated areas with higher incomes as well as pose high barriers of entry for competitors. This transformation has resulted in not only disposing of non-core assets, but investing hundreds of millions of dollars into redevelopment projects that will add hotels, apartments, and more experiential-based tenants. The end goal is to create social areas where one can do anything from live, to eat, watch a movie, workout, and just walk around with friends.
Second Quarter Results
Going into the quarter, analysts were expecting FFO of $0.36 per share and Revenue of $281.96M. Kimco met FFO expectations and beat top line forecasts, as you can see below. The FFO figure was $0.01 below FFO in the same quarter last year, while Revenue dropped 2.5% YoY as well. In my opinion, those are not bad numbers. I actually find it encouraging.
Source: Seeking Alpha
In my last piece, I asserted that I felt that we could be very close to seeing the bottom and instead seeing growth across all metrics. Well, Same-property NOI, increased 2.5% in Q2 YoY to $212M from $207M. Although Net Income was a little more than half of last year's for Q2, NOI was boosted by having less gains on sales of properties, this go round, as well as a 3.0% increase in rents. Furthermore, strong occupancy at 96.2%, tying their record, rose 20bps from the previous quarter, helped buoy NOI and FFO.
