Weingarten Realty Earnings Pose 3 Questions For UBS Analysts

Weingarten Realty Investors WRI reported a beat and raise quarter that led UBS to maintain its Buy rating and $45 target price on the stock.

The REIT reported second-quarter core funds from operations (FFO) of $0.57 a share, topping consensus view of $0.56, and raised full-year FFO outlook to a range of $2.28–2.32 per share from $2.27–$2.31.

3 Questions Arise From Q2

UBS analyst Jeremy Metz weighed on the results in the form of three questions:

"Overall, we think it was a good quarter and continue to view WRI as an attractive way to play the shopping center sector with a defensive cash flow stream driven by necessity oriented consumer spending."

Related Link: Jefferies Mostly Neutral On REIT Sector

• SSNOI including redevelopments was up +3.3 percent.
• Redevelopments contributed 70bps.
• Cash releasing spreads were strong at +18.2 percent.
• New leases up 29.4 percent.
• Renewals growing 14.4 percent.

However, leased occupancy of 94.9 percent dropped 60bps y/y, with a rejected TSA leased a noted drag. Box occupancy fell 100bps to 97.7 percent, while shop occupancy slipped 10bps to 90.2 percent.

Weingarten's revised core FFO guidance of $2.28–$2.32 compares to UBS estimate of $2.30 and consensus estimate of $2.29.

"Better than expected operations and acquisitions activity is being partially offset by capital markets activity and a $0.02 headwind from TSA (not prev in guidance)," Metz wrote in a note.

"Some shifts in redevelopment rent timing was another drag, taking down SSNOI 50bps to 3–4 percent, though core SSNOI was unchanged at 2.5–3.5 percent," Metz added.

At the time of writing, shares of Weingarten had risen 2.17 percent on the day to $43.60.

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