Equity One posts gain in 1Q results, repeats 2008 outlook

Shopping center real estate investment trust Equity One Inc. said its first-quarter results increased 10 percent, beating Wall Street's estimates, but rising food costs could hurt its tenants, some analysts say.

Late Tuesday, the REIT said its funds from operations, or FFO, rose to $32.7 million, or 44 cents per share, in the first quarter, from $29.7 million, or 40 cents per share, in the year-ago period.

On average, analysts polled by Thomson Financial expected FFO of 41 cents per share.

Equity One also reiterated its 2008 FFO guidance of $1.40 per share to $1.45 per share. Analysts on average are forecasting $1.42 per share.

FFO, which adds such items as amortization and depreciation back to net income, is considered a key measure of REIT strength because it gives a more accurate picture of cash performance.

BMO Capital Markets analyst Paul Adornato said in client note that the REIT's restaurant tenants could go under if they're unable to pass on food inflation costs, especially in housing bust markets like Florida and Atlanta. The analyst reiterates his "Underperform" rating on the stock.

However, Friedman, Billings, Ramsey & Co. analyst Paul Morgan said in a separate note that capital from the REIT's recent joint venture sale positions it to take advantage of acquisition opportunities in the next few quarters. Morgan repeats his "Outperform" rating.

First-quarter net income edged up to $20.9 million from $20 million in the prior year, while revenue increased to $48 million from $46.4 million.

Shares of the North Miami Beach, Fla.-based company slipped 6 cents to $24.98 in afternoon trading.