What to Expect When Retail Opportunity Investments Corp. Releases Q2 Earnings

One of Retail Opportunity Investments' 75 grocery-anchored shopping centers. Image source: Retail Opportunity Investments Corp.

Retail Opportunity Investments Corp. (ROIC 0.92%) is set to release second-quarter 2016 results later this week. With shares sitting near an all-time high as of this writing on the heels of last quarter's solid beat and raise, it's time to start thinking about what to expect.

Retail Opportunity Investments doesn't typically offer quarterly guidance. But keeping in mind we don't generally pay close attention to Wall Street's short-term expectations, analysts' consensus estimates predict Retail Opportunity Investments will turn in second-quarter revenue of $57.6 million, and funds from operations (or FFO, which essentially measures its cash flow from operations) of $0.26 per share.

That said, Retail Opportunity Investments will adjust its full-year guidance if need be based on each subsequent quarter's performance. As it stands, that guidance calls for 2016 funds from operations per share in the range of $1.02 to $1.06, and net income per share of $0.33 to $0.34. Given ROIC's past outperformance, it's unsurprising to see that analysts, on average, are currently modeling 2016 FFO near the high end of that range at $1.05 per share. However, regarding the per-share bottom line, we should also keep in mind Retail Opportunity Investments opportunistically raised cash earlier this month by offering almost 6.6 million new shares of common stock, with the proceeds of that offering primarily pegged for reducing borrowings under its $500 million unsecured revolving credit facility.

We should also expect to hear updates on the company's acquisitions activity. As of the end of Q1, for example, Retail Opportunity Investments had already committed $155.2 million to grocery-anchored shopping center acquisitions, including a two-property portfolio in the Santa Barbara, California area acquired for $64 million in March. The company also had two properties under contract, including a $59 million shopping center in Santa Clarita, California, and a $32.2 million center in Kirkland, Washington. Listen for new color on the closings of those two properties, as well as supplemental information on new acquisitions and under-contract deals including lease rates, square footage, locations, and pricing.

Management also reminded investors during last quarter's call the company is targeting selected dispositions, namely as it mulls whether to sell roughly $50 million in assets in Sacramento, California. Tanz elaborated during last quarter's call:

As we've built our portfolio over the last six years, we have been highly selective and disciplined in the type of shopping centers that we've acquired. And one of our key objectives of course is to focus on acquiring centers that are in irreplaceable, highly sought after locations. Most of them being privately owned, with a lot of opportunity to enhance value. So we will continue to look at our portfolio and we'll begin to sell off just a handful of assets, again, primarily Sacramento. So you'll start to see that process pick up in the second and third quarter of this year.

Even so, Tanz insisted in the grand scheme of things these $50 million in potential dispositions represent "nothing of any real significance," especially in relation to Retail Opportunity Investments' growing portfolio of 75 shopping centers encompassing 8.8 million square feet.

With that in mind, this week's report should also include the latest lease rates for that portfolio (97.2% last quarter, marking its ninth straight quarter above 97%), as well as indications of its pricing power with same-space comparative base rent trends (up 12.7% year over year in Q1). Within the latter, we'll receive details on percentage growth (or declines) in same-space comparative cash rent on new leases executed, and percentage changes in base rent from renewed leases.

Finally, recall as a real estate investment trust, Retail Opportunity Investments must return at least 90% of its income to shareholders in the form of dividends, which means any changes in its bottom-line performance should trickle down to investors. In February, that dividend was increased 5.9%, to $0.18 per share, which equates to an annual yield of roughly 3.2% at today's prices.

I don't expect any big surprises in Retail Opportunity Investments' Q2 report this week. Rather, as it continues to buy and revitalize shopping centers and build its enviable portfolio of properties, I suspect Retail Opportunity Investments' strategy will continue to appease long-term investors with market-beating gains.