Kimco Realty Corporation KIM is slated to report fourth-quarter and full-year 2024 results on Feb. 7, before the opening bell. The company’s quarterly results are likely to display year-over-year growth in revenues and funds from operations (FFO) per share.

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In the last reported quarter, this Jericho, NY-based retail real estate investment trust (REIT) outpaced the Zacks Consensus Estimate by 4.9% in terms of FFO per share. The company reported year-over-year growth in revenues. However, a rise in interest expenses acted as a dampener.

Over the preceding four quarters, Kimco’s FFO per share surpassed the Zacks Consensus Estimate on three occasions and met in the remaining period, the average beat being 2.5%. This is depicted in the graph below:

Kimco Realty Corporation Price and EPS Surprise

Kimco Realty Corporation price-eps-surprise | Kimco Realty Corporation Quote

U.S. Retail Real Estate Market in Q4

Per a report from CBRE Group CBRE, the U.S. overall retail availability rate remained unchanged at 4.7%, even after many store closures and a decrease in net absorption in the fourth quarter. Limited new development continued to support stability in retail market fundamentals.

The net absorption in the quarter witnessed a 14% sequential decline to 5.7 million square feet, bringing the year-end total to 22.4 million square feet. This decrease was mainly due to typical seasonality. Moreover, net absorption was only 33% of the 10-year quarterly average of 17 million square feet.

Amid rising construction costs, new retail development was at a low level. Construction completions aggregated 4 million square feet, down 52% from the prior quarter. Labor shortages and tight lending conditions have sharply reduced the pace of new retail development in the fourth quarter, per the CBRE report.

Asking rent growth remained strong in the fourth quarter, with the average asking rent increasing 0.4% quarter over quarter and 2.5% year over year to $23.80 per square foot. The report noted that the rise was driven by strong competition for limited space and high demand for prime locations.

Factors to Consider Ahead of KIM’s Upcoming Results

Kimco owns properties in the drivable first-ring suburbs of its top major metropolitan Sunbelt and coastal markets, which offer several growth levers like high employment and strong spending power. Given a healthy retail real estate environment in the fourth quarter, the company is likely to have witnessed decent demand for its properties, boosting its quarterly performance.

Led by a healthy mix of essential, necessity-based tenants and omnichannel retailers, this retail REIT enjoys a diverse tenant base. This is likely to have aided stable revenue generation during the to-be-reported quarter, driving top-line growth.

As the mixed-use segment continues to gain from the recovery in the apartment and retail sectors, Kimco’s focus on developing mixed-use assets clustered in strong economic metropolitan statistical areas is likely to have given it an edge by driving net asset value.

The company’s solid balance sheet position is likely to have supported its growth endeavors.

However, high interest expenses are anticipated to have affected Kimco’s performance to some extent during the quarter.

Q4 Projections for KIM

The company’s top line is expected to have improved due to these tailwinds. The Zacks Consensus Estimate for KIM’s quarterly revenues stands at $516.7 million, implying 14.4% growth from the prior-year reported number.

Our estimate for net revenues from rental properties stands at $505.5 million, suggesting a 12.9% increase year over year. We expect KIM’s leased occupancy to increase 100 basis points sequentially to 97.4% in the to-be-reported quarter.

However, we estimate a year-over-year increase of 17.7% in its fourth-quarter interest expenses.

Before the fourth-quarter earnings release, the company’s activities were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has remained unrevised at 42 cents in the past month. However, it suggests a year-over-year increase of 7.7%.

Full-Year 2024 Projections for KIM

For 2024, Kimco projected FFO per share in the range of $1.64-$1.65. This is backed by the company’s projection for same-property net operating income (NOI) growth (inclusive of RPT) of more than 3.25% and total acquisitions and structured investments of $565-$625 million.

For the full year, the Zacks Consensus Estimate for FFO per share is pegged at $1.64. The figure indicates a 4.5% increase year over year on 14.3% year-over-year growth in revenues to $2.04 billion.

For 2024, we expect same-property NOI to increase 14.1% year over year. We estimate a year-over-year increase of 21.5% in its 2024 interest expenses.

What Our Quantitative Model Predicts

Our proven model predicts a likely surprise in terms of FFO per share for Kimco 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.

Kimco currently has an Earnings ESP of +2.11% and carries 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 two other stocks from the broader REIT sector — $Vornado Realty Trust(VNO-N)$ VNO and Host Hotels & Resorts HST — that you may want to consider, as our model shows that these, too, have the right combination of elements to report a surprise this quarter.

Vornado Realty, scheduled to report quarterly numbers on Feb. 10, has an Earnings ESP of +2.25% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Host Hotels is slated to report quarterly numbers on Feb. 19. HST has an Earnings ESP of +2.79% and carries a Zacks Rank of 3 presently.

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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Host Hotels & Resorts, Inc. (HST) : Free Stock Analysis Report

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