On the fundamentals, this company delivered an excellent quarter. They saw growth in sales for tenants, growth in rent, beat on FFO, raised guidance, and raised dividends. Its success is contrary to the narrative surrounding retail. I rarely share my top ideas for free.
Simon Property Group (SPG) delivered an excellent third quarter. Q3 FFO comes in at $2.89 per share. That’s up from $2.70 per share a year ago and beats estimates of $2.87. New guidance for the year comes in at “$11.17 to $11.22”. The old guidance was "$11.14 to $11.22”. Simon’s guidance for FFO includes negative non-recurring impacts of $.36 for the extinguishment of debt in Q2 2017 which would be stripped out in AFFO. The dividend goes up to $1.85 from $1.80 in the prior quarter. The market reacts by dropping SPG about 3.8% (as of writing). SPG’s performance should be a huge positive factor for the sector since it is the largest mall REIT by a substantial margin. On the earnings call, transcripts not yet available, SPG’s management referenced retail sales figures stating “…absolutely an underreporting going on”. They are arguing that the transition to online sales is not as fast as it seems because tenants have an incentive to report their transactions as online sales.
Source: Seeking Alpha
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