What's in Store for Federal Realty Stock in Q1 Earnings Season?

Federal Realty Investment Trust FRT, a leading real estate investment trust (REIT) focused on retail properties, is set to report its first-quarter 2025 results on May 8, after market close. In anticipation of the announcement, industry analysts and investors are eager to assess the company's performance and prospects in the current economic climate.

In the last reported quarter, this retail REIT met the Zacks Consensus Estimate for FFO of $1.73 per share. Results reflected healthy leasing activity and significant occupancy gains at its properties.

Over the last four quarters, Federal Realty surpassed estimates on one occasion, met on another and missed on the other two, the average miss being 0.15%. The graph below depicts the surprise history of the company:

Federal Realty Investment Trust Price and EPS Surprise

Federal Realty Investment Trust price-eps-surprise | Federal Realty Investment Trust Quote

In this article, we will dive deep into the U.S. retail real estate market environment and the company's fundamentals and analyze the factors that may have contributed to its first-quarter 2025 performance.

US Retail Real Estate Market in Q1 2025

Per a Cushman & Wakefield CWK report, there has been a pullback in net absorption for the U.S. shopping center market, resulting in a negative shift in the first quarter. Although the national vacancy rate increased 20 basis points (bps) to 5.5% year over year, it remains near a historical low, with minimal new construction and most tenants having already right-sized their real estate needs. Asking rents for the U.S. shopping center market grew from the year-ago quarter.

The first quarter witnessed negative net absorption in the U.S. shopping center market, totaling 5.9 million square feet (msf). This represents the largest single-quarter decline since the third quarter of 2020. The decrease was due to negative net absorption observed in all four regions of the country. Neighborhood centers accounted for 75% of the pullback in demand.

The lack of new construction is also contributing to the scarcity, as only 2.2 msf of new shopping center space was delivered from the beginning of the year through April 14, 2025. As of the first quarter of 2025, there are only 10.6 msf under construction, with an inventory of 4.32 billion square feet.

The reversal in net demand is easing pressure on asking rents. The asking rents for U.S. shopping centers increased 2.3% year over year to $24.76 per square foot in the first quarter.

Factors to Consider Ahead of FRT’s Q1 Results

In the first quarter, Federal Realty is likely to have gained from its premium retail assets in affluent communities with favorable demographics, mainly situated in major coastal markets from Washington, D.C. to Boston, San Francisco and Los Angeles, along with a diverse tenant base.

A well-located portfolio with 80% of its centers having a grocery component offering essential goods and services is likely to have aided stable revenue generation during the to-be-reported quarter, driving top-line growth. Moreover, FRT’s focus on developing urban mixed-use assets is likely to have given it an edge, contributing to its revenue growth.

However, high interest expenses are anticipated to have affected FRT’s performance to some extent during the quarter.

Projections for FRT

Our estimate places FRT's leasing rate at 95.7%, down 50 basis points sequentially, while the rent per square foot is projected to grow 1.9% year over year.

The Zacks Consensus Estimate for quarterly revenues is pegged at $306.93 million, which indicates a 5.4% increase from the year-ago period. The consensus mark for rental revenues is pegged at $305.73 million, which suggests a rise from the year-ago period’s $291.05 million. Rental income from minimum rents — commercial — is pegged at $207.76 million, up from $192.94 million in the year-ago period. Rental income from cost reimbursements is projected at $57.62 million, up from $56.56 million in the prior-year period.

However, our estimate suggests a year-over-year increase of 2.4% in the company's first-quarter 2025 interest expenses.

Federal Realty’s activities during the soon-to-be-reported quarter were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the first-quarter FFO per share has been revised a cent downward to $1.69 over the past month. However, it suggests a 3.1% increase year over year. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

What Our Quantitative Model Predicts for FRT

Our proven model does not conclusively predict a surprise in terms of FFO per share for Federal Realty this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.

Federal Realty has an Earnings ESP of -0.82% and currently carries a Zacks Rank of 4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

A Stock That Warrants a Look

Here is one stock from the broader REIT sector — Lamar Advertising LAMR— that you may want to consider, as our model shows that it has the right combination of elements to report a surprise this quarter.

Lamar Advertising, scheduled to report quarterly numbers on May 8, has an Earnings ESP of +1.63% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Another Retail REIT

Kimco Realty Corp. (KIM) reported first-quarter 2025 FFO per share of 44 cents, which beat the Zacks Consensus Estimate of 42 cents. The metric grew 12.8% from the year-ago quarter.

Results have reflected better-than-expected growth in revenues, though a rise in interest expenses acted as a dampener.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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