Simon Property (SPG) Down 12.1% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Simon Property (SPG). Shares have lost about 12.1% in that time frame, underperforming the S&P 500.

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

Simon Property Q4 FFO & Revenues Beat Estimates, NOI Up

Simon Property’s fourth-quarter 2019 FFO per share of $2.96 surpassed the Zacks Consensus Estimate of $2.95. However, the reported tally comes in 8.4% lower than the year-ago quarter’s FFO of $3.23 per share.

Results reflected increase in leasing spread per square foot at the company’s U.S. malls and Premium Outlets.

Further, the company generated revenues of nearly $1.49 billion in the quarter, outpacing the Zacks Consensus Estimate of $1.47 billion. The revenue figure also comes in 1.9% higher than the prior-year quarter’s reported tally.

For full-year 2019, the FFO per share came in at $12.04, matching the Zacks Consensus Estimate but lower than the prior-year tally of $12.13. Moreover, revenues witnessed 1.9% year-over-year growth to $5.7 billion.

Inside the Headline Numbers

For the U.S. Malls and Premium Outlets portfolio, occupancy was 95.1% as of Dec 31, 2019. Retailer sales per square foot came in at $693 for the trailing 12-month period, marking 4.8% growth. Base minimum rent per square feet was $54.59 as of Dec 31, 2019. Furthermore, leasing spread per square foot for the trailing 12-month period ended Dec 31, 2019 increased 14.4% to $7.83.

Total portfolio net operating income (NOI) growth for the reported quarter came in at 1.7%. Comparable-property NOI growth for the same period came in at 1.7%.

At the end of fourth-quarter 2019, Simon Property had redevelopment and expansion projects, including the redevelopment of former department store spaces, ongoing at more than 30 properties in the United States, Asia and Europe. The company’s share of costs of all new development and redevelopment projects under construction was around $1.8 billion at the end of the reported quarter.

Balance-Sheet Position

The company exited 2019 with cash and cash equivalents of $669.4 million compared with the $514.3 million reported at the end of December 2018.

Notably, during the October-December, the company accomplished a three-tranche senior notes offering, aggregating $3.5 billion, having a weighted average coupon rate of 2.61% and weighted average term of 15.9 years. Moreover, it retired all or part of four series of senior notes totaling around $2.6 billion (USD equivalent).

Simon Property had more than $7.1 billion of liquidity as of Dec 31, 2019. This comprised cash on hand, including available capacity under the company’s revolving credit facilities, and its share of joint-venture cash.

Outlook

Simon Property expects 2020 FFO per share in the range of $12.25-$12.40.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Simon Property has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 broadly trending downward for the stock, and the magnitude of these revisions has been net zero. It's no surprise Simon Property has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.