Shares of Kimco Realty KIM have gained 30.9% in the past six months compared with its industry’s rally of 15.6%.

This Jericho, NY-based retail real estate investment trust (REIT) is well-poised to benefit from its portfolio of premium shopping centers, predominantly grocery-anchored, in the drivable first-ring suburbs within key major metropolitan Sunbelt and coastal markets. Its focus on developing mixed-use assets and a healthy balance sheet position bode well for long-term growth.

Last month, the company reported third-quarter 2024 funds from operations (FFO) per share of 41 cents, beating the Zacks Consensus Estimate by a penny. The metric grew 7.5% from the year-ago quarter. Results reflected a year-over-year rise in revenues.

Analysts seem bullish on this Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for its 2024 FFO per share grew one cent in the past week to 42 cents.

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Let’s find out the factors behind the surge in the stock price.

Strategic Location of KIM

Kimco’s properties are located in the drivable first-ring suburbs within key major metropolitan Sunbelt and coastal markets. Particularly, 82% of the annual base rent (”ABR”) comes from its top major metro markets. Given the strategic location of its properties, it is likely to witness healthy demand in the near term, boosting leasing activity.

KIM’s Diversified Tenant Base

Kimco enjoys a diverse tenant base, led by a healthy mix of essential, necessity-based tenants and omni-channel retailers. National/regional tenants accounted for 81% of KIM’s pro rata ABR as of the end of the third quarter of 2024. Given the strength of its retailers with a developed omnichannel presence, the company is likely to be able to generate stable cash flows.

Focus to Develop Grocery-Anchored Centers & Mixed-Use Assets

During uncertain times, the grocery component saved the grace of the retail REITs. As of Sept. 30, 2024, Kimco achieved 84% ABR from the grocery-anchored portfolio from 78% in 2020. KIM has set a target to reach 85% of its ABR from this segment.

In the third quarter of 2024, Kimco witnessed 55 consecutive quarters of positive leasing spreads, indicating solid pricing power across its high-quality portfolio. Given the necessity-driven nature of the company’s grocery-anchored portfolio, it is likely to continue witnessing healthy leasing activity in the upcoming period and remains well-positioned to tide over challenging times.

The company also emphasizes mixed-use assets clustered in strong economic metropolitan statistical areas. The mixed-use assets category is benefiting from the recovery in both the apartment and retail sectors.

KIM’s Opportunistic Investment Policy

Kimco has been following an opportunistic investment policy to enhance its overall portfolio quality. This includes divesting its joint venture assets and using the proceeds to fund acquisitions and development and redevelopment projects. In the first nine months of 2024, the company disposed of 11 operating properties and seven land parcels in separate transactions for an aggregate sales price of $254.1 million.

The acquisition of RPT in January 2024 has benefited the company by increasing scale in high-growth target markets and preserving balance sheet strength. The company is expected to achieve its 2024 acquisitions range of $565 million to $625 million, including structured investments.

KIM’s Solid Balance Sheet Position

Moreover, Kimco maintains a solid balance sheet position. It exited the third quarter of 2024 with $2.8 billion of immediate liquidity. Its consolidated weighted average debt maturity profile is 8.3 years. It also enjoys investment-grade ratings of A- from Fitch, BBB+ from S&P and Baa1 from Moody’s, rendering it favorable access to the debt market. With a healthy financial footing, KIM is well-positioned to capitalize on long-term growth opportunities.

Risks Likely to Affect KIM’s Positive Trend

A rise in e-commerce adoption and efforts of online retailers to go deeper into the grocery business are concerns. Kimco faces competition from several real estate companies and developers who compete with the company for leasing space in shopping centers for tenants. This may affect the company’s ability to raise rental rates, including renewal rates and fill up vacancies.

Stocks to Consider

Some other top-ranked stocks from the retail REIT sector are Tanger Inc. SKT and Regency Centers REG, each currently carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for SKT’s 2024 FFO per share stands at $2.10, indicating an increase of 7.1% from the year-ago reported figure.

The Zacks Consensus Estimate for REG’s 2024 FFO per share is pinned at $4.24, suggesting year-over-year growth of 2.2%.

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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