Shares of Kimco Realty Corporation (KIM) scaled a new 52-week high of $26.76 on Jan 8, following the disclosure of its transaction activities and substantial strategic exit from Latin America in 2014.
Broader market was optimistic as well, driven by expectations for a continued low rate environment for some more time following the Fed minutes disclosure. The stock closed at $26.60, reflecting a solid return of 33.4% over the past one year. The trading volume for the session was nearly 2.3 million shares.
Despite scaling such a high, we believe that this retail real estate investment trust (“REIT”) can prove to be a good choice, given the improving market fundamentals, favorable rate environment and positive Earnings ESP.
Growth Drivers
Riding high on its portfolio-transformation activities, Kimco, in this week, disclosed fourth-quarter deals worth $999 million and full-year 2014 transactions of $3.1 billion. The company has also largely liquidated its Mexican portfolio, reflecting substantial effort to depart from Latin America.
Kimco is currently focused on strengthening its portfolio base in key markets across the U.S. and Canada. The company is shedding slower-growth assets from non-strategic markets and joint ventures. Moreover, it is aggressively pruning its Latin American portfolio and redeploying the proceeds to acquire high-quality U.S. shopping centers. We believe such efforts, along with solid demand for Kimco’s properties and easy access to capital, promise considerable upside potential.
Finally, Kimco also came up with encouraging third-quarter results. Its third-quarter 2014 FFO per share, as adjusted, came in at 36 cents, a penny ahead of the Zacks Consensus Estimate and 3 cents above the prior-year quarter figure. Results benefited from growth in U.S. same-property net operating income (“NOI”).
Over the last 30 days, the Zacks Consensus Estimate for 2014 remained unchanged at $1.40, while that for 2015 moved a cent up to $1.46. Moreover, Kimco’s Zacks Rank #2 (Buy) and positive Earnings ESP of 2.86%, which represents the difference between the Most Accurate estimate (36 cents here) and the Zacks Consensus Estimate (35 cents), make us reasonably confident of a positive earnings beat.
Other Stocks Scaling Highs
Other REIT stocks that have scaled 52-week highs on Jan 8 include Avalonbay Communities Inc. (AVB), Essex Property Trust Inc. (ESS) and Prologis Inc. (PLD).
Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.
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