Please ensure Javascript is enabled for purposes of website accessibility

Here's Why PREIT Is Dropping on Wednesday

By Matthew Frankel, CFP® - Jul 31, 2019 at 4:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The retail REIT gave investors some disappointing numbers.

What happened

PREIT (PEI -9.69%), a real estate investment trust, or REIT, that operates shopping malls primarily located in the mid-Atlantic region, is under pressure on Wednesday. As of 2:30 p.m. EDT, the company's stock price had fallen by more than 10% for the day.

So what

PREIT released its second quarter earnings report, and it's not difficult to see why investors might be disappointed. Adjusted funds from operations (FFO), the REIT version of "earnings," fell to $0.22 per share from $0.39 in the second quarter of last year.

Family shopping at a mall.

Image source: Getty Images.

In addition, same-store net operating income declined by 3% year over year, and the company's results were significantly impacted by the wave of retail bankruptcies and store closures. The company says that it lost $1.6 million of rent due to these events in the second quarter alone, and non-anchor occupancy declined by 180 basis points compared with a year ago.

What's more, the company reduced its full-year adjusted FFO guidance range to $1.20-$1.30 from a previous range of $1.20 to $1.34, a two-cent reduction at the midpoint. As most stock market followers can tell you, there's no more reliable way to cause a stock's price to drop than to lower your future expectations.

Now what

To be sure, the quarter wasn't all bad. At PREIT's top properties, comparable sales increased more than 5%. However, there was clearly more bad news than good, and until the retail closures and bankruptcies subside, it's tough to envision a major turnaround in the company's performance anytime soon.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Pennsylvania Real Estate Investment Trust Stock Quote
Pennsylvania Real Estate Investment Trust
PEI
$0.41 (-9.69%) $0.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.