Simon Property Group $SPG just turned in mixed results, and the market wasn’t having it.
Shares dropped 6.2% following the release, marking the stock’s worst earnings reaction since 2009.
In a market that’s punishing anything less than perfection, this wasn’t the quarter to come up short.
Fundamentals weren’t terrible, but they weren’t great either.
Net operating income growth slowed dramatically, occupancy rates stagnated, and guidance was uninspiring.
That’s all it took...
This is a stock that’s been working hard to reclaim its long-term highs.
But when your biggest earnings reaction in over a decade is to the downside, that’s not a sign of confidence.
It’s a sign investors are nervous and no longer willing to give the benefit of the doubt.
Simon’s still a heavyweight in the REIT space. But after this report, it’s clear that the margin for error is gone.
So what else did we learn from yesterday's earnings reactions? Let's dive into the details.
Here are the latest earnings reports from the S&P 500 👇
*Click the image to enlarge it
Davita $DVA had the best reaction score after reporting a double beat.
The company reported revenues of $3.22B, versus the expected $3.21B, and earnings per share of $2.00, versus the expected $1.95.
Simon Property Group $SPG had the worst reaction score after reporting mixed results.
The company reported revenues of $1.47B, versus the expected $1.35B, and earnings per share of $1.27, versus the expected $1.36.
Now let's dive into the data and talk about what happened with these reports 👇
DVA has been punished for 5 consecutive earnings reports:
DaVita fell 0.3% after this earnings report, and here's why:
U.S. treatments per day declined 0.4% year-over-year and were about 0.5% below expectations.
Free cash flow for Q1 was negative $45M, a notable decline from previous quarters.
The consolidated operating margin dropped to 13.6% from 17.2% in Q4 2024.
Despite beating top and bottom-line expectations, this company was punished for this report. The market doesn't like what's happening here...
In early 2024, the stock broke out of a multi-year base. Since then, it has gone nowhere.
This chop is beginning to resemble a distribution pattern, with the key level of interest being the prior cycle's peak.
If DVG is above 136, the path of least resistance will shift from sideways to lower for the foreseeable future.
SPG had its worst earnings reaction since 2009:
Simon Property Group fell 6.2% after this earnings report, and here's why:
Net income attributable to common stockholders dropped significantly to $413.7M from $731.7M in the prior year.
Management reaffirmed its full-year guidance, but the market was expecting them to raise their forecast.
Property operating expenses, home and regional office costs, and general and administrative expenses all increased year-over-year. This is a significant reason why net income attributable to common stockholders declined so substantially.
This company dominates the retail real estate industry, but that doesn't matter at the moment. They have a lot of problems!
Late last year, the stock attempted to break above the peak of the prior cycle, but the bears quickly rejected it.
With the price firmly below that key level of interest and the extreme negative earnings reaction, we don't like this name right now.
If SPG is below 171, the path of least resistance will likely remain sideways to lower for the foreseeable future.
Thank you for reading.
- The Beat Report Team
PS: The behemoth retailer, Walmart $WMT, is scheduled to report earnings after today's closing bell. If you want to hear a breakdown of the report from a retail industry expert, you need to see this. Jeff Macke is the son of a former executive at Target $TGT, so he knows exactly what to look for in these reports.
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