BofA: Concerns For Kimco Realty In 2018, 2019 Justify Downgrade

Kimco Realty Corp KIM reported fourth-quarter results Thursday. Despite a top-and-bottom-line beat in the report, at least one Wall Street analyst is projecting multiple concerns for the REIT. 

The Analyst

Bank of America's Craig Schmidt downgraded Kimco Realty's stock rating from Buy to Neutral with a price target lowered from $17.50 to $16.50.

The Thesis

Kimco Realty's earnings report showed the company is taking the right steps to improve its portfolio for the long-term, but there are two negative aspects that can't be overlooked, Schmidt said in the downgrade note. (See the analyst's track record here.)

Kimco expects a weaker same-store net operating income growth in 2018 of 1.25 to 2 percent, below expectations, the analyst said. The midpoint reading of 1.6 percent would represent the lowest growth since the recession and may imply there are "many unknowns" for 2018 and possibly 2019.

The REIT's $300-million share repurchase program announcement is "short-sighted" given the balance sheet's already high leverage, while the free cash flow is needed to fund a large redevelopment program, Schmidt said. 

Price Action

Shares of Kimco Realty were trading higher by more than 2 percent Friday afternoon. 

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