Realty Income Earnings: Strong FFO Growth Even Though Acquisition Volume Slowing

Second-quarter results for no-moat Realty Income were slightly better than we anticipated, giving us confidence in our $75 per share fair value estimate. Economic occupancy improved 10 basis points sequentially to 98.9%, better than our estimate of a 30-basis-point decline to 98.5%. Re-leasing spreads were 5.7% for the second quarter, slightly above our estimate of new rent terms being 3.1% compared with expiring rent. However, same-store revenue grew only 0.2% in the quarter, below our estimate of 1.4% growth, as revenue for retail tenants fell 0.3%. Still, Realty Income reported adjusted funds from operations of $1.06 per share for the second quarter, which was 2 cents better than our $1.04 estimate and 6.3% higher than the $1.00 figure the company reported in the second quarter of 2023.