Shares of Realty Income (O) were relatively flat in after-hours trading after the real estate investment trust (REIT) reported earnings for its third quarter of Fiscal Year 2024. Earnings per share came in at $0.30, which missed analysts’ consensus estimate of $0.35 per share. In addition, Funds from Operations (FFO), which is the more widely used metric for REITs, came in at $0.99 per share (when normalized to exclude acquisition costs), which also missed estimates of $1.06.
FFO is measured by adding back depreciation and amortization, along with losses incurred on asset sales, to earnings. After that, any gains on asset sales and interest income are subtracted from earnings.
However, sales increased by 27.9% year-over-year, with revenue hitting $1.33 billion. This beat analysts’ expectations of $1.26 billion. These results were driven by a strong occupancy rate of 98.7% and same-store rent growth of 0.2% year-over-year.
Realty Income’s 2024 Outlook
Looking forward, management now expects the following for FY 2024:
- Normalized FFO per share between $4.16 and $4.21 versus analysts’ estimates of $4.22 per share
- Same-store rent growth of approximately 1%
- Occupancy rate of over 98%
As you can see, guidance for FFO per share was worse than expected. Nevertheless, the stock’s after-hours movement was basically flat. This is probably due to the fact that shares sold off heading into today’s report, which suggests investors had anticipated a miss and priced it in already.
Is O Stock a Buy or Sell?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on O stock based on four Buys, six Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 24% increase in its share price over the past year, the average Realty Income price target of $65.45 per share implies 10.1% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
