What to Expect from Simon Property in 2Q17

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What to Expect from Simon Property in 2Q17 PART 1 OF 8

What to Expect from Simon Property in 2Q17

Expected 2Q17 performance

Simon Property Group (SPG) is scheduled to report its 2Q17 earnings on August 1, 2017. Analysts expect the company to report adjusted funds from operation (or FFO) of $2.59, down 1.2% from $2.63 reported a year ago.

What to Expect from Simon Property in 2Q17

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The lower year-over-year FFO for 2Q17 reflects the company’s declining revenue due to the ongoing headwinds in the commercial REIT sector.

Macro factors are the key to growth

Consumers are turning away from visiting malls in favor of online shopping. As a result, retail stores are experiencing declining traffic and sales. The losses have prompted some retailers to shut down their stores, which has left many vacant spaces in malls. When large retailers leave a mall, it deprives the mall of its anchor, which translates into huge losses for mall owners.

On the other hand, President Trump’s pro-American policy has triggered a boom in industrial activity, which has resulted in a slow and steady increase in job growth. Plus, lower gas prices and expected tax reforms have resulted in a spike in consumer confidence. With higher disposable income, consumers are expected to increase their spending on discretionary commodities.

A strong start to 2017

Simon Property Group started 2017 on a strong note. The company reported 1Q17 earnings per share (or EPS) of $1.53, marginally beating the consensus estimate by 2%. Earnings also surpassed the year-ago results by 4% backed by higher revenues. FFO came in at $2.74 per share for 1Q17, higher than $2.63 per share reported a year ago.

Optimistic fiscal 2017 outlook

Simon Property expects adjusted FFO to rise 6% in fiscal 2017. The company projects FFO for fiscal 2017 to be in the range of $11.45 to $11.55 per share.

Other peers in the same industry like Equity Residential (EQR), GGP (GGP), and Kimco Realty (KIM) are expected to report FFOs of $0.76, $0.35, and $0.38, respectively.

Simon Property and its above-mentioned peers make up almost 13% of the Vanguard REIT ETF (VNQ). Vanguard’s broadly diversified portfolio provides a cushion to investors from macro headwinds.


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