Balanced View on Kimco - Analyst Blog

On Mar 27, 2014, we issued an updated research report on the retail real estate investment trust (REIT) – Kimco Realty Corporation KIM.

On Feb 5, Kimco reported fourth-quarter 2013 adjusted FFO per share of 33 cents, in line with the Zacks Consensus Estimate and the year-ago quarter figure. The flat results were primarily due to the shedding of the American Industries industrial portfolio investments and divestiture of the InTown Suites extended stay portfolio in 2013.

Going forward, we believe that Kimco's efforts to improve its core portfolio through divestiture of non-strategic and non-retail assets as well as acquisition of high-quality properties would help it to ride on the growth trajectory. In addition, a significant redevelopment pipeline is encouraging as the properties are positioned in high-income, high-growth areas. Moreover, the high credit tenant retention limits the downside risk and provides a long-term steady source of income for the company.

Although the portfolio restructuring looks promising going forward, high disposition activity tends to dilute earnings in the near term and a significant redevelopment pipeline increases operational risks. Furthermore, rising online sales that adversely affect the demand for retail space remains a concern and an anticipated increase in interest rate may dent its financial results, going forward.

Over the last 30 days, the Zacks Consensus Estimate for 2014 FFO per share moved south by a penny to $1.38. However, it remained stable at $1.47 for 2015 FFO per share. Consequently, the stock currently has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Better-ranked stocks in the retail REIT industry include General Growth Properties, Inc GGP, Federal Realty Investment Trust FRT and Simon Property Group Inc. SPG. All these stocks carry the Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.