Realty Income Expects Benefit from Higher Occupancy Rate in Q2 (NYSE:O)

Income from real estate (NYSE:O) A higher occupancy rate is expected to benefit the retail real estate investment trust when it reports its second-quarter results on Monday, August 5, after the market close.

The consensus FFO estimate is $1.05 (+3.38% YoY) and the consensus revenue estimate is $1.21 billion (+21.42% YoY).

Company O reported better-than-expected first-quarter revenue following a $598 million investment, and its profits came in slightly higher than expected as occupancy rates remained stable.

According to Cushman & Wakefield’s macroeconomic forecasts for the middle of the year, demand for retail properties remains strong, which is partly due to the large number of stores opened by large retail chains.

In addition, there is a lack of new supply, with less than 12 million square feet of retail space under construction and a total stock of more than 4.3 billion square feet, the report noted.

“Retail properties have a low vacancy rate, which benefits companies like Realty Income and Agree Realty,” said Brad Thomas, RPA associate.

The net lease REIT reaffirmed its 2024 guidance for normalized FFO of $4.17-$4.29 at the end of the first quarter, compared with the consensus of $4.22.

In Q2, O is expected to achieve 98.7% occupancy, according to Bloomberg consensus, slightly higher than Q1’s rate of 98.6%.

“We believe O is well-positioned given its high-quality, diversified portfolio, track record of generating consistent AFFO growth, and strong balance sheet. We believe Realty’s size, scale, IG exposure, and international footprint provide advantages relative to peers. However, O’s size likely limits growth as additional investments may have less impact and larger deals may be more difficult to acquire in the current environment,” KeyBanc Capital Markets said in a research note, with a Sector Weight rating on the stock.

Sell-side analysts and Seeking Alpha contributors have rated the stock a Buy.

The Quant Rating system also rates Realty Income as a Buy, with a score of 3.92 on a 5-point scale. The rating system gives the company a B- for valuation, A+ for growth, A for profitability, C for momentum and B- for revisions.