Ushering in good news for Federal Realty Investment Trust FRT, Moody’s Investor Services, the rating arm of Moody’s Corp. MCO, has affirmed the company’s senior unsecured debt rating of A3 with a stable outlook.
The rating affirmation was backed by Federal Realty's manageable debt maturity schedule, strong liquidity and credit metrics. Moreover, this retail real estate investment trust (REIT) has been appreciated not only for solid positioning of its properties in well-established, densely populated communities with decent demographics and solid pipeline of redevelopment scopes, but also for its success in enhancing value of its premium retail assets, sustaining an elevated occupancy level and attaining sector-leading releasing spreads.
Further, the rating agency expects Federal Realty to adhere to a conservative business strategy focused on premium non-mall retail assets, while maintaining its leadership in core markets and aiming for measured, strategic growth. All these are reflected in the company’s stable outlook.
We believe that this rating affirmation is a positive for this retail REIT as it establishes the company’s creditworthiness in the market and bolsters investors’ confidence in the stock. This, in turn, improves the company’s financial flexibility and offers means to pursue growth strategies.
Notably, Federal Realty posted an earnings surprise of 1.49% in the last reported quarter. Moreover, the company has delivered positive surprises in three of the trailing four quarters with an average beat of 1.97%.
Its historical EPS growth (3–5 years) of 6.71% is above the industry average of 6.32%. Moreover, its earnings momentum is expected to continue in the near term as reflected by the company’s projected EPS growth (F1/F0) of 7.76%, compared to the industry average rate of 7.05%. This reflects favorable prospects for the company.
Federal Realty currently carries a Zacks Rank #3 (Hold). Investors interested in the retail REIT sector may consider stocks like Regency Centers Corporation REG and Simon Property Group Inc. SPG. Both carry a Zacks Rank #2 (Buy).
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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