Zacks Industry Outlook Highlights: Kimco Realty, Macerich, Acadia Realty Trust, HCP and Health Care REIT

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Jun 28, 2013, 09:30 ET

CHICAGO, June 28, 2013 /PRNewswire/ -- Today, Zacks Equity Research discusses the U.S. Real Estate Investment Trusts (REIT), including Kimco Realty Corporation (NYSE:KIM-Free Report), The Macerich Company (NYSE:MAC-Free Report), Acadia Realty Trust (NYSE:AKR-Free Report), HCP Inc. (NYSE:HCP-Free Report) and Health Care REIT, Inc. (NYSE:HCN-Free Report).

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Industry: Estate Investment Trusts (REIT)

Link http://www.zacks.com/commentary/27910/reit-industry-review-amp-stock-picks-june-2013

The broader Finance sector, of which REITs are a part, remains in excellent earnings shape. The first quarter 2013 results for the sector were impressive in terms of both beat ratios (percentage of companies coming out with positive surprises) and growth.

The earnings "beat ratio" was 73.4% while the revenue "beat ratio" was 51.9%. Total earnings for this sector were up 7.7%, slightly moderating from the 10.0% growth in the fourth quarter of 2012. Total revenues moved north 5.5% in the quarter versus 23.1% growth in the prior quarter.

Looking at the consensus earnings expectations for the rest of the year, we remain encouraged since earnings are expected to grow 19.1% in the second quarter, 7.6% in the third quarter and 27.6% in the fourth quarter, thereby registering full-year 2013 growth of 14.0%.

OPPORTUNITIES

Retail REITs: Being a leader, the U.S. retail industry provides adequate growth prospects for these REITs. Despite the rise in online shopping through the Internet, mobile phones and tablets, it is the physical interaction that the millennial generation stills prefers while shopping. Hence, amid the technological advancements, in order to increase their market dominance, the retail industry keeps on reinventing, redesigning and revamping their physical stores.

With retail properties in premium locations, companies like Kimco Realty Corporation (NYSE:KIM-Free Report), The Macerich Company (NYSE:MAC-Free Report) and Acadia Realty Trust (NYSE:AKR-Free Report) remain our primary choices.

Healthcare REIT: Relatively immune to the macroeconomic problems, these REITs are expected to benefit from rising national health expenditures that are projected to grow 3.8% in 2013 and 7.4% in 2014, according to Centers for Medicare and Medicaid Services. Also, the federal agency projects average compounded annual growth rate of health expenditures of 6.2% over 2015 through 2021.

Moreover, though the forthcoming wave of retiring baby boomers is often cited as a threat to the U.S. economy, this is a boon for the healthcare sector as senior citizens spend 200% more than the average population.

Hence, we believe that Healthcare REITs like HCP Inc. (NYSE:HCP-Free Report) and Health Care REIT, Inc. (NYSE:HCN-Free Report) can capitalize on this trend.

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