Summary

Realty Income Corp. (O) has been a topic of interest for many investors lately, with its stock price experiencing fluctuations over the past month. As one of the most watched stocks by Zacks.com visitors, it’s essential to review some of the factors that may impact the near-term performance of the stock.

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Revisions to Earnings Estimates

Realty Income Corp.’s future direction is heavily influenced by changes in earnings estimates among sell-side analysts. Our analysis at Zacks focuses on how these revisions affect a company’s fair value, which ultimately determines its stock price. When earnings estimates rise, the fair value of the stock increases as well, leading to higher market prices.

The current quarter’s consensus estimate for Realty Income Corp. is $1.06 per share, showing no change from last year’s quarter. Over the past 30 days, this estimate has changed by +0.4%. For the current fiscal year, the consensus earnings estimate of $4.28 indicates a +2.2% year-over-year change, with a +0.3% revision over the same period.

Looking ahead to the next fiscal year, the consensus earnings estimate is $4.41, representing a +3% change from last year’s expected figures. This estimate has remained relatively stable, changing by only +0.1% over the past month.

The proprietary stock rating tool at Zacks, known as the Zacks Rank, incorporates these revisions and other factors to provide a more comprehensive picture of a company’s price direction in the near term. With a recent change in consensus estimates and three additional factors related to earnings estimates, Realty Income Corp. is currently rated a Zacks Rank #3 (Hold), indicating it may perform similarly to the broader market.

Projected Revenue Growth

While earnings growth is often seen as the most important indicator of a company’s financial health, revenue growth plays a vital role in sustaining this momentum over time. A company cannot consistently increase its earnings without growing its revenues first. Therefore, it’s essential to examine Realty Income Corp.’s potential revenue growth.

The consensus sales estimate for the current quarter is $1.39 billion, representing a +4.1% year-over-year change. For the current and next fiscal years, estimates stand at $5.61 billion and $5.87 billion, respectively, indicating changes of +6.5% and +4.6%.

Last Reported Results and Surprise History

Realty Income Corp.’s latest reported results show revenues of $1.38 billion for the quarter, a year-over-year increase of +9.5%. However, its EPS of $0.28 was below expectations, resulting in an 0% surprise.

Over the last four quarters, Realty Income Corp. has exceeded consensus revenue estimates twice but failed to meet earnings expectations on most occasions, including the latest reported period. This mixed performance could be a concern for investors and analysts alike.

Valuation

No investment decision can proceed without considering a stock’s valuation. It is essential to determine whether a company’s current market price accurately reflects its intrinsic value and growth prospects. Comparing Realty Income Corp.’s current valuation multiples, such as P/E, P/S, and P/CF ratios, with their historical values provides insight into the fairness of its stock price relative to its peers.

The Zacks Value Style Score grades stocks from A to F based on both traditional and unconventional valuation metrics, offering a comprehensive view of whether a stock is overvalued, undervalued, or fairly valued. Realty Income Corp. currently holds a D rating, indicating it trades at a premium compared to its industry peers.

Conclusion

The facts discussed in this article, combined with other information available on Zacks.com, can help investors decide if the market buzz around Realty Income Corp. is worth paying attention to. However, given its current Zacks Rank #3 (Hold), the stock may perform similarly to the broader market in the near term.

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