Yahoo Finance Is It Wise to Retain Federal Realty (FRT) Stock for Now?
The increase in consumers’ preference for in-person shopping experiences following the pandemic downtime has been driving the recovery of the retail real estate industry. Amid this environment, Federal Realty FRT is well-poised to benefit from its portfolio of premium assets in the United States.
This retail real estate investment trust’s (REIT) properties are located in the first-ring suburbs of the nine major metropolitan markets of the United States, mainly in the key coastal markets from Washington DC to Boston, San Francisco and Los Angeles. The markets have high barriers to entry and strong demographics, and the infill nature of its properties allows FRT to enjoy high occupancy.
The company has a well-diversified tenant base of retailers, including TJX Companies, Kroger and CVS Corporation. This minimizes the risks related to any particular retail industry and assures a stable source of rental revenues.
Federal Realty’s efforts to explore the mixed-use development option, which has gained immense popularity in recent years, will enable it to tap growth opportunities in areas where people prefer to live, work and play. Moreover, FRT’s expansion efforts into premium markets and initiatives to redevelop and reposition its assets seem encouraging.
On the balance sheet front, at closing in October 2022, Federal Realty had $1.4 billion of total liquidity in cash, including complete availability on its $1.25 billion facility. Further, its investment-grade credit ratings render the company favorable access to the debt market. With a strong balance sheet, FRT is well-positioned to capitalize on long-term growth opportunities.
Analysts seem bullish about this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for the company’s 2022 funds from operations (FFO) per share has moved marginally upward over the past month to $6.30, indicating a favorable outlook for FRT.
Shares of Federal Realty have risen 5.2% over the past month, outperforming its industry’s growth of 5.1%.
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However, given the conveniences of online shopping, rising e-commerce adoption is concerning for Federal Realty. Online retailing will remain a popular choice among customers, adversely impacting the market share for brick-and-mortar stores.
A slowdown in the economy, an inflationary environment and interest rate hikes could limit consumers’ willingness to spend to some extent in the coming quarters. Also, rising interest rates might increase the company's borrowing costs, affecting its ability to purchase or develop real estate.
Stocks to Consider
Some better-ranked stocks from the retail REIT sector are National Retail Properties NNN and Tanger Factory Outlet Centers SKT, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for National Retail Properties’ 2022 FFO per share has climbed up 12.3% over the past two months to $3.20.
The Zacks Consensus Estimate for Tanger Factory Outlet Centers’ 2022 FFO per share has moved marginally north over the past two months to $1.81.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Federal Realty Investment Trust (FRT) : Free Stock Analysis Report
National Retail Properties (NNN) : Free Stock Analysis Report
Tanger Factory Outlet Centers, Inc. (SKT) : Free Stock Analysis Report
