Realty Income's Portfolio Fundamentals at or Near Historic Highs in 1Q

Realty Income's first-quarter earnings were slightly ahead of our expectations, though we don't see anything from the quarter that would materially change our $76 fair value estimate for the no-moat company. Economic occupancy rebounded 30 basis points to 99.2%, matching the company's historic record, which it last hit in the third quarter of 2021. Re-leasing spreads were also strong at 6.2% in the first quarter, one of the best results for a quarter over the past decade. Same-store net operating income grew 4.1%, which is also one of the highest levels in the company's history. As a result, Realty Income reported adjusted funds from operations of $0.98 per share in the first quarter, a 14.0% increase over the first quarter of 2021 and 4 cents ahead of our $0.94 estimate. Despite the better-than-anticipated first-quarter results, management did not raise 2022, and since our AFFO estimate of $3.90 is at the midpoint of management's guidance range of $3.84 to $3.97 for the year, we don't anticipate making any material changes to our forward estimates.