Realty Income's AFFO Miss and FY25 Outlook: Stock Impact

Realty Income Corporation, known for its strong portfolio in real estate investments, saw its stock decline on Tuesday. The drop followed the company’s announcement regarding its financial performance for the fourth quarter.

During the latest quarter, Realty Income reported an adjusted funds from operations (AFFO) of $1.05 per share. This represents a 4.0% growth year-over-year but unfortunately fell short of analysts' expectations, which were set at $1.07 per share.

A positive note from the report is the company's successful rent recapture efforts. The new annualized contractual rent from re-leases amounted to $52.5 million, up from $48.9 million in the previous year, marking a rent recapture rate of 107.4% on those units.

As of the end of December 2024, Realty Income has an extensive portfolio consisting of 15,621 properties, leased to 1,565 clients across 89 different industries. The overall occupancy rate remains high at 98.7%. Notably, the company has 205 properties currently available for lease or sale, maintaining occupancy levels that were consistent with prior quarters.

Dividend Announcement: In February 2025, Realty Income’s Board of Directors announced a significant share repurchase program, authorizing up to $2.0 billion for this purpose. Additionally, the company has declared a 1.5% increase in its monthly dividend, bringing the total to $0.268 per share, which is set to be paid on March 14, 2025, to those on record as of March 3, 2025.

Realty Income was able to raise $947.8 million from common stock sales, primarily through its At-The-Market (ATM) program, achieving a weighted average sale price of $58.12 per share.

The company’s liquidity situation as of December 31, 2024, stands strong, with $3.7 billion available. This includes $445 million in cash and equivalents, $91.8 million in unsettled ATM forward equity, and $67.3 million in borrowings through commercial paper programs.

According to Realty Income’s President and CEO, Sumit Roy, the company's strategic approach to capital deployment throughout the year culminated in successful investment activity during the fourth quarter. He highlighted their advantages in accessing capital, which allows them to remain competitive in seeking acquisition opportunities while effectively managing their portfolio.

Future Projections: Looking ahead to fiscal year 2025, Realty Income projects earnings to be between $1.52 and $1.58 per share. The company anticipates approximately 1% growth in same-store rents. However, the expected adjusted AFFO is projected to be between $4.22 and $4.28 per share, which is below the market consensus estimation of $4.38.

Investors interested in gaining exposure to Realty Income can consider index funds such as the Janus Henderson U.S. Real Estate ETF and the Columbia ETF Trust I Columbia Research Enhanced Real Estate ETF.

Stock Performance: Following the earnings announcement, Realty Income shares (O) fell by approximately 3.25% and were trading at $55.45 at the last market check.

Realty, Income, Stock