Morningstar | Kimco Realty Beats First-Quarter Estimates Thanks to Strength of Same-Store Portfolio
Kimco Realty produced a strong first quarter that came in slightly ahead of our estimates. However, the company only updated guidance on the margins, and our full-year estimates are still in the updated guidance range so we don't anticipate any material changes to our $18.30 fair value estimate for the no-moat company. Occupancy went up 20 basis points sequentially to 96.0% as anchor occupancy increased 40 basis points to 97.8%, though small-shop occupancy dipped 50 basis points off the record occupancy the company saw last quarter. Leasing spreads for the same-store portfolio were up 8.9% in the first quarter, slightly stronger than the figure reported at the end of 2018. As a result, same-store revenue was up 3.2%, ahead of our 2.8% estimate. Considering that same-store expenses only grew 1.7% this quarter, same-store net operating income growth was 3.7% and beat our 2.8% estimate. The NOI beat led to adjusted funds from operations coming in a penny ahead of our assumption at $0.37 for the quarter.Despite the better-than-expected first quarter, 2019 guidance remains mostly unchanged. The strong first quarter allowed management to raise the low end of 2019 NOI growth by 25 basis point to a new range of 1.75% to 2.50%. Even though we think management is being conservative and could potentially raise NOI guidance further in future quarters, given that we are near the high end of this range before incorporating the better-then-expected first quarter into our estimates we don't think we will make any major changes to our fundamental assumptions for Kimco. Adjusted funds from operations remains in a range of $1.44 to $1.48, and if we add the penny beat from the first quarter to our 2019 estimate we would be at the midpoint of Kimco's guidance. The first quarter was a very good quarter for Kimco from our perspective, and the results give us more confidence in our outlook for the company.
Kimco Realty is a self-administered real estate investment trust. The company and its subsidiaries are engaged principally in the ownership, management, development and operation of open-air shopping centers, which are anchored generally by grocery stores, off-price retailers, discounters or service-oriented tenants. Additionally, the company provides complementary services on its retail real estate capabilities. The company's ownership interests in real estate consist of its consolidated portfolio and portfolios where the company owns an economic interest, such as properties in the company's investment real estate management programs, where the company partners with institutional investors and also retains management.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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