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What’s in store for Federal Realty (FRT) this earnings season?

Federal Real Estate Investment Trust FRT is expected to release its third quarter 2021 results on November 4, after the bell. The company’s quarterly results will likely show increases in income and operating funds (OFOs) per share.

During the last quarter published, this retail real estate investment trust (“REIT”) recorded a surprise of 21.55% in terms of FFOs per share. The results reflect higher income than expected.

Over the past four quarters, Federal Realty has beaten estimates on all occasions, the average pace being 11.16%. The graph below describes the company’s surprise story:

Federal Real Estate Investment Trust Price and BPA Surprise

Federal Realty Investment Trust price-eps-surprise | Federal Real Estate Investment Trust Listing

Let’s see how things turned out before this announcement.

Key factors

According to a report by CBRE Group CBRE, total retail sales increased 15% year-over-year in the third quarter. The third quarter marked the fourth consecutive quarter of positive absorption in retail (+36.7 million square feet) and each asset class posted quarter-over-quarter gains. In addition, the average asking rent improved for the third consecutive quarter, increasing 2.9% year over year to reach $ 21.31 per square foot in the third quarter.

The overall retail availability rate fell to a 10-year low of 5.9% in the end-September quarter, from 6.2% in the end-June quarter. New construction shipments were 6.4 million square feet in the third quarter, down 29% year-over-year due to rising material costs and supply delays.

Federal Realty should also have benefited from the recovery in the commercial real estate market. The company has a portfolio of high-end retail assets, primarily located in major coastal markets from Washington, DC to Boston, San Francisco and Los Angeles. The company has strategically selected the suburbs of the 1st ring of the main metropolitan markets. Due to the high demographics and the infill nature of its properties, the company has been able to maintain a high occupancy rate over the years. In addition, its focus on the outdoor format and the concept of “The Pick-Up” likely helped the company attract tenants in the third quarter amid the current health crisis.

Additionally, with the economy recovering, widespread immunization and strong consumer spending, retail REIT is expected to have benefited from its superior assets in prime locations and experienced an improvement in the rental environment.

In addition, tenants are now in a better position to generate income and pay their rents. As a result, the pressure on retail owners has likely eased and the company’s rent collection figures are expected to improve in the third quarter.

Federal Realty took advantage of expansion opportunities in high-end markets, which generates revenue growth and creates long-term value, and this continued into the third quarter. Retail REIT announced the acquisition of a 100% stake in the Twinbrooke Shopping Center in Fairfax, Virginia. He bought this off-market acquisition for $ 33.8 million in cash. The acquisition is a strategic fit for the company, given the potential for value creation through thank-merchandising and capital investment.

Zacks’ consensus estimate for quarterly revenue is set at $ 229.3 million, calling for a 10.2% increase from the prior year period. The consensus mark for rental income is set at $ 227 million, which suggests an increase from the $ 207 million in the prior year period.

Federal Realty’s activities during the next quarter were sufficient to gain the confidence of analysts. Zacks’ consensus estimate for the third quarter FFO per share was revised up one cent to $ 1.27 in a month. It also suggests growth of 13.4%, year over year.

Here is what our quantitative model predicts:

Our proven model predicts a surprise in terms of FFOs per share for Federal Realty this season. The combination of a positive earnings ESP and a Zacks # 1 (strong buy), 2 (buy), or 3 (hold) rank increases the odds of an FFO beat. You can discover the best stocks to buy or sell before they are flagged with our ESP Earnings Filter.

Federal Realty currently has a Zacks Rank of 2 and a Revenue ESP of + 0.49%.

Other actions that deserve a look

Here are a few stocks in the REIT sector that you might want to consider, as our model shows that they too have the right mix of elements to signal positive surprises this quarter:

STORE Capital company STOR, which is expected to report quarterly numbers on November 4, currently has an ESP of +1.02% gains and a Zacks rank of 3. You can see The full list of today’s Zacks # 1 Rank stocks here.

Simon Real Estate Group SPG, which is due to release its quarterly results on November 1, has a revenue ESP of + 1.29% and currently carries a Zacks rank of 2.

To note: Everything about earnings presented in this valuation represents funds from operations (FFO) – a measure widely used to assess the performance of REITs..

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Simon Property Group, Inc. (SPG): Free Stock Analysis Report

Federal Realty Investment Trust (FRT): Free Stock Analysis Report

STORE Capital Corporation (STOR): Free share analysis report

CBRE Group, Inc. (CBRE): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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