DDR Corp (DDR) Q4 FFO & Revenues Beat Estimates, Stock Up

DDR Corp.’s (NYSE:DDR) fourth-quarter 2017 funds from operations (FFO) per share of 28 cents surpassed the Zacks Consensus Estimate of 26 cents. However, the figure declined a couple of cents from the prior-year quarter.

The company generated revenues of $209.4 million for the fourth quarter, surpassing the Zacks Consensus Estimate of $208 million. However, the top line fell short of $232.2 million recorded in the year-ago quarter.

Amid these, shares of DDR climbed 4.87% to $7.73 during the regular trading session on Feb 16.

For 2017, the company reported FFO per share of $1.18, lower than the prior-year figure of $1.28. Also, full-year revenues of $887.9 million lagged the prior-year quarter's tally of $969.5 million.

Quarter in Detail

Same-store net operating income (NOI) for the total portfolio, excluding Puerto Rico, on a pro rata basis, came in at -0.4%. Further, the company on a pro rata basis for the total portfolio for the quarter generated new leasing and renewal leasing spreads of 23.9% and 2.2%, repestively, in the reported quarter.

DDR reported a leased rate of 93.2% as of Dec 31, 2017 compared with 95.0% at 2016-end on a pro rata basis for the total portfolio.

Annualized base rent per occupied square-foot for the total portfolio increased 6.5% on a pro rata basis to $16.46 as of Dec 31, 2017 from $15.46 a year ago.

Notably, DDR sold 14 shopping centers and land parcels for a total sale price of $590.1 million during the quarter under review, thereby aggregating $246 million at DDR's share.

Moreover, the company repaid $104 million of mortgage-debt, scheduled to mature in 2018.

DDR exited the fourth quarter with $92.6 million in cash compared with $30.4 million as of Dec 31, 2016.

Outlook

DDR provided guidance for 2018 except for OFFO, which was provided for the third quarter of 2018 for New DDR. The New DDR provided marks for the results of the assets that are going to remain within the company after the completion of the $900-million disposition program and the spin-off of RVI.

For third-quarter 2018, the OFFO is going to be at least 15 cents. Whereas the same store NOI growth is projected at a minimum 1.5% for the full year.

Further, RVI fee income is anticipated to be around $10 million for the year.

Bottom Line

In December 2017, DDR announced its board's decision to spin off a portfolio of 50 sellable assets into a separate public-traded REIT. This move might help the company streamline its portfolio and focus on the core markets. Further, this aggressive capital-recycling program is expected to drive the company's growth over the long term.

However, the choppy retail real estate environment is anticipated to limit demand for space in the near term, thanks to the shift in customers’ shopping preferences toward online purchases. Also, an aggressive asset disposition is likely to leave a dilutive effect on earnings. Hike in interest rate further adds to the comany's woes.

DDR Corp. Price, Consensus and EPS Surprise

DDR carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks That Warrant a Look

Here are a few stocks in the REIT space that you may want to consider, as our model shows that these have the right combination of elements to deliver a positive surprise this time around:

Host Hotels & Resorts, Inc. (NYSE:HST) , slated to report quarterly numbers on Feb 21, has an Earnings ESP of +0.25% and a Zacks Rank of 3.

Outfront Media Inc. (NYSE:OUT) , scheduled to release quarterly numbers on Feb 27, has an Earnings ESP of +0.90% and a Zacks Rank of 3.

Gramercy Property Trust (NYSE:GPT) , slated to release fourth-quarter results on Feb 28, has an Earnings ESP of +2.49% and a Zacks Rank of 3.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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