Regency Centers (REG) Down 17.8% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Regency Centers (REG). Shares have lost about 17.8% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Regency Centers due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Regency Centers Q4 FFO Beats Estimates, Revenues Up Y/Y

Regency Centers’ fourth-quarter 2019 NAREIT FFO per share of $1.00 surpassed the Zacks Consensus Estimate of 98 cents. The reported figure was 2% higher than the prior-year quarter number.

Quarterly results reflected growth in revenues, driven by an increase in lease income and other property income. Also, decent leasing activity and rent spreads aided performance.

Total revenues in the quarter were $280.9 million, lagging the Zacks Consensus Estimate of $284.7 million. However, the figure increased from the year-ago figure of $277.1 million.

For 2019, NAREIT FFO per share was $3.89, which surpassed the Zacks Consensus Estimate of $3.87. The reported figure was 1.6% higher than the prior-year number. Total revenues were $1.10 billion, missing the Zacks Consensus Estimate of $1.13 billion. However, the figure increased from the year-ago number of $1.09 billion.

Inside the Headlines

During the reported quarter, Regency Centers executed 1.8 million square feet of comparable new and renewal leases, leading to rent spread on new leases and renewal leases of 19.6% and 8.8%, respectively, with blended rent spreads for the December-end quarter of 11.3%.

As of Dec 31, 2019, the company’s wholly-owned portfolio along with its pro-rata shares of co-investment partnerships was 94.8% leased. Its same-property portfolio was 95.1% leased. Same-property net operating income, excluding termination fees, increased 1.9% on a year-over-year basis.

Regency Centers’ cash and cash equivalents were $115.6 million at Dec 31, 2019, up from $45.2 million recorded at the end of 2018. It has fixed charge coverage of 4.3x.

Portfolio Activity

During the reported quarter, the company sold 3 shopping centers for a total of $58.8 million. Also, it started on phase I of a three-phase redevelopment at Serramonte Center, located south of San Francisco, which included relocating Crunch Fitness to a new outparcel building, the addition of a new Regal theater, and adding several new outparcel restaurants and a new hotel. Notably, phase II commenced in January 2020 and phase III is expected to commence in 2021.

At the end of 2019, the company had 22 properties in development or redevelopment, indicating estimated net project costs of $350.8 million. Further, in-process development and redevelopment projects were 90% leased, projected to yield an average return of 7.3%.

Outlook

Regency Centers expects 2020 NAREIT FFO per share of $3.90-$3.93. The company’s full-year outlook is backed by same-property NOI growth, excluding termination fees of 0% or more.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Regency Centers has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Regency Centers has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.