Earnings Cheat Sheet: Simon Property Group Sees Better Days Ahead at Retail

Simon Property Group (SPG) is a real estate investment trust best known for regional malls and premium outlet centers. If you’ve ever visited Boca Raton, FL on a vacation, then you’ve heard of the famous Town Center Mall, one of Simon’s premiere properties. Simon owns or has interest in almost 400 properties in North America, Europe and Asia. Last year, the shopping gloom was felt from the fear-filled shopper as Simon shares hit the $20s range. However, this year the shopping sentiment has shown better signs of life for Simon as shares approach the $100 mark today, or a 4-fold increase from 2009 lows. Here’s the earnings breakdown from SPG’s latest quarterly release:

Earnings: Net income climbed to $230.6 million, or $.79 cents per share. In the same quarter a year ago, SPG earned $105.5 million, or $.38 cents per share. Year-over-year, SPG more-than-doubled its profit. The company would have shown a profit of $.93 per share, but attributed $.14 to transaction expenses during the quarter.

Revenue: Increased 5.9% to $979.3 million, from $924.9 billion a year ago.

Actual versus Wall Street Expectations: Analysts expected Simon Property Group to earn $.90 per share and $932.04 million in revenue. SPG beat analyst estimates, a great sign for the retail sector.

Notable Stats: The company increased its quarterly cash dividend by 33% from $.60 per share to $.80 cents per share.

SPG sold $900 million worth of 4.375% senior unsecured notes due 2021

Simon’s average rent in the U.S. climbed to $38.69 a square foot, better than $38.35 a year ago.

Property 0ccupancy rose to 93.6% from 92.8%.

Simon predicts full-year funds from operations of $5.90-$5.95 per share, compared to its prior prediction of $5.87 per share.

Did You Hear That? David Simon, Chairman and CEO of Simon Property Group, stated, “Operating performance was strong as our U.S. regional mall and Premium Outlet portfolio generated comparable property net operating income growth of 3.6% in the third quarter. Our tenants also experienced a strong 10.6% increase in sales in the quarter as compared to the third quarter of 2009…We continue to see improvement in our business conditions.”

Commentary: On a technical basis, shares of SPG have been trading above its 50-day moving average since late July and its 200-day moving average all year. Recently the National Retail Federation issued its holiday season sales forecast and revealed this holiday season will be the best in the past 4 years. With high expectations for the holiday season, remain mindful that a disappointing holiday season could damper the rising trend of SPG shares. Meanwhile, once elections pass this week, and the announcement of tax cuts remain in place for Americans, SPG could continue to benefit from the “my money remains in my pocket” consumer mindset effect.

Disclosure: No positions held