Kimco Beats By A Penny - Analyst Blog

Kimco Realty Corporation(KIM) reported third quarter 2010 funds from operations of 27 cents per share and passed the Zacks Consensus estimates by only a penny. The funds from operations per share increased 3.8% sequentially, but declined 10% compared to same quarter last year.

Revenue for the quarter increased 10.7% year-over-year to $210.5 million but failed to beat the Zacks Consensus estimates of $214.0 million. Revenue also declined sequentially from $214.0 million.

Quarter In Detail

US same-property NOI (cash-basis, excluding lease termination fees and including charges for bad debts) increased 2.2% compared on year over year basis and it is the highest increase since the third quarter 2008.

Occupancy in both the combined and the US shopping center portfolio increased significantly. While the former increased 30 basis points to 92.7% from prior year quarter the latter had an increase of 40 basis points to 92.3%.

Kimco also executed 637 new leases in the combined shopping center portfolio spanning a total of 1.6 million square feet.

During the quarter Kimco disposed 5 non-strategic shopping center properties for $97.9 million which included $81 million of mortgage debt.

Along with 24 institutional partners and 156 properties in other joint ventures, Kimco had 286 properties in its investment management program at the quarter end. Investment management business helped Kimco realize a $9.1 million of fee income.

Management increased quarterly cash dividend to 18 cents per common share, payable on January 18, 2011 to shareholders as of record on January 3, 2011, representing an ex-dividend date of December 30, 2010.

Guidance & Zacks Estimates

Management raised the 2010 funds from operation guidance from previous range of $1.14-$1.18 to $1.17-$1.19 per share. The guidance provided by the company is well above the Zacks consensus estimates for the next year of $1.11 per share.

This estimate had been stable in the run up to earnings release with no revisions from any analysts. Estimate for next year at $1.17 has also remained stable for last 30 days though one analyst had a positive revision.

Our Take

With a geographically diverse portfolio, concentrated mostly in high-income, high-growth areas, Kimco is the largest publicly traded owner and operator of neighborhood and community shopping centers in the U.S. Kimco is currently focusing on its core business activities to tide over the volatility in the market. In addition, the company has a strong balance sheet with easy access to capital to allow for continued growth. However, consumer discretionary spending continues to be under severe stress due to the prolonged recession.

We currently have a Zacks #3 rank for Kimco, which translates into a Hold rating on short-term basis. For long-term we recommend a neutral rating.