Is Regency Centers (REG) Poised to Beat Earnings Estimates? - Analyst Blog

Regency Centers Corporation REG – the retail real estate investment trust (REIT) – is slated to report its first-quarter 2014 results on May 7, after the market close. Last quarter, it posted a 3.13% positive surprise.

The company has posted an average positive earnings surprise of 3.56% over the past four quarters, beating the estimate in the last 4 quarters. Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model reveals that Regency is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: The company's Earnings ESP, which represents the difference between the Most Accurate estimate (66 cents) and the Zacks Consensus Estimate (65 cents), stands at +1.54%. This is meaningful and a leading indicator of a likely positive earnings surprise for the shares.

Zacks Rank: Regency carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks #1, 2 or 3 have a significantly higher chance of beating earnings.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

What is Driving the Better-than-Expected Earnings?

Regency primarily focuses on building a premium portfolio of grocery-anchored shopping centers. Such centers are usually necessity driven and drive in dependable traffic. Moreover, growing consumer confidence is essentially increasing the demand for retail goods and in turn, the demand for real estates supporting this sector. Also, amid a low supply of new properties, we expect this to aid growth in rents.  

The recent analysis by the commercial real estate services firm CBRE Group, Inc. CBG is encouraging. This study reveals that the retail availability rate dropped 10 bps to 11.9% in the first-quarter 2014, reflecting its first dip below 12% since 2009. The CBRE forecast of a further decline in availability rate for neighborhood and community shopping centers to 10.6% in 2014 raises our hope further.   

Other Stocks to Consider

Regency is not the only firm looking up this earnings season. Other stocks in the REIT sector that have both a positive Earnings ESP and a favorable Zacks Rank are:

Strategic Hotels & Resorts, Inc. BEE, with an Earnings ESP of +83.3% and a Zacks Rank #2. The company will release its first-quarter 2014 results on May 7, after the closing bell.

Kimco Realty Corp. KIM, with an Earnings ESP of +2.94% and a Zacks Rank #3. This company will also report its first-quarter 2014 results on May 7, after the closing bell.