Shares of Saul Centers ( BFS ) have been a poor performer over the past year, essentially treading water and missing out on most of the market upside. This has been consistent with a history of underperformanceOver fifteen years of experience making contrarian bets based on my macro view and stock-specific turnaround stories to garner outsized returns with a favorable risk/reward profile. If you want me to cover a specific stock or have a question for an article, just let me know!Analyst’s Disclosure: I/we ...

Core Insights - Saul Centers (BFS) reported quarterly funds from operations (FFO) of $0.63 per share, missing the Zacks Consensus Estimate of $0.68 per share, and down from $0.79 per share a year ago [1][2] - The company posted revenues of $67.92 million for the quarter, missing the Zacks Consensus Estimate by 1.47%, but up from $66.68 million year-over-year [3] - The stock has underperformed the market, losing about 5% since the beginning of the year compared to the S&P 500's decline of -0.3% [4] Financial Performance - The FFO surprise for the quarter was -7.35%, while the previous quarter saw a positive surprise of 3.75% with an actual FFO of $0.83 against an expected $0.80 [2] - Over the last four quarters, Saul Centers has surpassed consensus FFO estimates three times [2] - The current consensus FFO estimate for the upcoming quarter is $0.73 on revenues of $69.76 million, and for the current fiscal year, it is $2.92 on revenues of $286.88 million [8] Industry Context - Saul Centers operates within the Zacks REIT and Equity Trust - Retail industry, which is currently ranked in the top 28% of over 250 Zacks industries [9] - The performance of the stock may be influenced by the overall outlook for the industry, as research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1 [9] Future Outlook - The sustainability of the stock's price movement will depend on management's commentary during the earnings call and the trends in estimate revisions [4][5] - The current estimate revisions trend for Saul Centers is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [7]

Portfolio and Development - As of December 31, 2024, the Company’s portfolio included 50 shopping center properties, eight mixed-use properties, and four non-operating development properties[23]. - The Company has a development pipeline for up to an additional 3,200 apartment units and 870,000 square feet of retail and office space, all located near WMATA red line Metro stations in Montgomery County, Maryland[29][33]. - The Company is developing Twinbrook Quarter Phase I, which includes 452 apartment units and an 80,000 square foot Wegmans supermarket, with a total expected project cost of approximately $331.5 million, of which $318.0 million has been invested to date[57]. - The Company is also developing Hampden House, expected to include up to 366 apartment units and 10,100 square feet of retail space, with a total project cost of approximately $246.4 million, of which $200.5 million has been invested to date[58]. - The Company plans to selectively add free-standing pad site buildings within its Shopping Center portfolio and has two executed leases with four more under negotiation for a total of six additional pad sites[34]. Financial Management and Debt - The Company intends to maintain a total debt to total asset value ratio of 50% or less, with current debt levels believed to be below this threshold as of December 31, 2024[42]. - The Company intends to finance future acquisitions and developments through various sources, including undistributed operating cash flow and secured or unsecured borrowings[44]. - As of December 31, 2024, the company had approximately $1.55 billion of debt outstanding, with $1.37 billion being fixed-rate debt and $187 million being variable-rate debt[98]. - The Company has a $145.0 million construction-to-permanent loan for the Twinbrook Quarter project, with an outstanding balance of $127.3 million as of December 31, 2024[57]. - The company has a general policy of limiting borrowings to 50% of asset value, but there is no formal limitation on the amount of indebtedness that may be incurred[99]. Operational Strategy and Management - Management aims to optimize the mix of uses in Shopping Centers to improve foot traffic and intends to renegotiate leases and seek new tenants to increase occupancy and cash flow[30]. - Management believes there are attractive supply/demand characteristics in several sub-markets where the Company operates, positioning it to take advantage of future investment opportunities[35]. - The Company shares certain ancillary functions with the Saul Organization to achieve lower costs and greater economies of scale[25]. - The Company focuses on diversification through development of transit-oriented, residential mixed-use projects and expansion of grocery-anchored shopping centers in the Washington, DC metropolitan area[21][29]. - Management will selectively replace underperforming tenants with those that generate stronger traffic, including grocery store anchors[34]. Market and Economic Risks - The Company faces risks related to tenant bankruptcies, which could adversely affect revenue and occupancy levels[65]. - Over 85% of the Company's property operating income is generated from properties in the metropolitan Washington, DC/Baltimore area, making it susceptible to economic changes in that region[74]. - The company faces significant competition in the retail sector from online merchants and other shopping centers, which could adversely affect leasing and rental rates[75]. - The shift towards telecommuting and flexible work arrangements may reduce demand for office space, impacting occupancy and rental rates[76]. - Financial and economic conditions, including high inflation and unemployment, may adversely impact the company's business and tenants, leading to potential defaults[123]. Employee and Corporate Governance - The Company has approximately 69 full-time equivalent corporate employees and 72 full-time employees at its properties as of December 31, 2024[51]. - The Company is committed to equal employment opportunities and provides competitive employee compensation, including insurance benefits and retirement savings plans[52]. - The Company supports employee education through reimbursement for undergraduate and graduate degrees, as well as costs related to seminars and workshops[53]. - As of December 31, 2024, Mr. B. F. Saul II controlled 45.2% of the company's common stock, which may lead to conflicts of interest[87]. - Consent from limited partners is required for significant actions, such as the sale of substantially all assets, which could limit the company's operational flexibility[97]. Environmental and Regulatory Considerations - The Company is subject to various laws and regulations relating to environmental and pollution controls, but does not expect a materially adverse effect on property operations[54]. - The company faces potential adverse effects from environmental liabilities that could impact property values and operational costs[110]. - Climate change and natural disasters could increase operational costs and negatively impact tenant demand, affecting cash flow and operating results[131]. Financial Performance and Risks - The largest shopping center anchor tenant, Giant Food, accounted for 4.8% of the Company's total revenue for the year ended December 31, 2024[67]. - The company incurred $11.4 million in charges related to shared services with the Saul Organization for the year ended December 31, 2024[92]. - The company's rent expense for the year ended December 31, 2024, was $847,600[94]. - The ability to pay dividends at historical rates is not guaranteed and depends on various factors including financial condition and REIT qualification[132]. - The company may face challenges in selling properties quickly due to the illiquid nature of real estate investments, impacting financial flexibility[84].

Revenue Performance - Total revenue for Q4 2024 increased to $67.9 million, up from $66.7 million in Q4 2023, representing a growth of 1.8%[3] - For the full year 2024, total revenue increased to $268.8 million from $257.2 million in 2023, a growth of 4.2%[10] - Total revenue for Q4 2024 was $67,924,000, a slight increase from $66,683,000 in Q4 2023, representing a growth of 1.86%[20] - Rental revenue increased to $66,634,000 in Q4 2024 from $62,858,000 in Q4 2023, marking a growth of 6.3%[20] Net Income - Net income for Q4 2024 decreased to $10.4 million, down from $17.5 million in Q4 2023, a decline of 40.6%[3] - Net income for the full year 2024 decreased to $67.7 million from $69.0 million in 2023, a decline of 1.9%[10] - The company reported a net income available to common stockholders of $5,291,000 in Q4 2024, down from $10,407,000 in Q4 2023, a decrease of 49.3%[20] - Basic net income per share available to common stockholders was $0.22 in Q4 2024, down from $0.43 in Q4 2023, a decline of 48.8%[20] - Net income for Q4 2024 was $10,358,000, a decrease of 40.5% compared to $17,463,000 in Q4 2023[27] Funds from Operations (FFO) - Funds from operations (FFO) available to common stockholders decreased to $22.0 million, or $0.63 per share, compared to $26.9 million, or $0.79 per share, in Q4 2023, a decrease of 18.2%[7] - FFO available to common stockholders for the full year 2024 increased to $106.8 million, or $3.10 per share, from $106.3 million, or $3.17 per share, in 2023[12] - Funds from Operations (FFO) for Q4 2024 was $24,758,000, compared to $29,666,000 in Q4 2023, a decline of 16.5%[22] - FFO available to common stockholders and noncontrolling interests was $21,959,000 in Q4 2024, down from $26,867,000 in Q4 2023, a decrease of 18.4%[22] - Basic FFO per share available to common stockholders was $0.63 in Q4 2024, compared to $0.79 in Q4 2023, a decline of 20.3%[22] Property Performance - Same property revenue decreased by $564,000, or 0.8%, and same property operating income decreased by $1.2 million, or 2.5%, for Q4 2024 compared to Q4 2023[5] - Same property revenue for the full year 2024 increased by $10.0 million, or 3.9%, compared to 2023[11] - Total same property revenue for Q4 2024 was $65,909,000, slightly down from $66,473,000 in Q4 2023, a decrease of 0.85%[25] - Mixed-Use properties revenue increased to $20,081,000 in Q4 2024 from $19,486,000 in Q4 2023, representing a growth of 3.04%[25] - Same property operating income for the year ended 2024 was $195,657,000, representing a 3.3% increase from $189,402,000 in 2023[27] - Mixed-Use same property operating income for Q4 2024 was $12,859,000, up 4.9% from $12,255,000 in Q4 2023[30] - Total Mixed-Use same property revenue for the year ended 2024 was $50,958,000, up 3.3% from $49,340,000 in 2023[30] Expenses - Interest expense increased to $16,768,000 in Q4 2024, compared to $12,635,000 in Q4 2023, reflecting a rise of 32.5%[27] - General and administrative expenses for the year ended 2024 were $25,066,000, an increase of 6.9% from $23,459,000 in 2023[27] Other Financial Metrics - The initial operations of Twinbrook Quarter Phase I adversely impacted net income by $7.1 million for the full year 2024[10] - Revenue adjustments for Q4 2024 amounted to $7,279,000, compared to a negative adjustment of $210,000 in Q4 2023[28] - The company reported a gain on disposition of property of $(181,000) for the year ended 2024, compared to no gain in 2023[27]

Core Insights - Saul Centers, Inc. reported total revenue of $67.9 million for the quarter ended December 31, 2024, an increase from $66.7 million in the same quarter of 2023, while net income decreased to $10.4 million from $17.5 million [1][2][7] Financial Performance - The company's net income for the 2024 Quarter was adversely impacted by $6.8 million due to the initial operations of Twinbrook Quarter Phase 1, which includes residential units and a supermarket [2][5] - Funds from operations (FFO) available to common stockholders decreased to $22.0 million, or $0.63 per share, compared to $26.9 million, or $0.79 per share, in the 2023 Quarter [5][9] - For the year ended December 31, 2024, total revenue increased to $268.8 million from $257.2 million in 2023, while net income decreased to $67.7 million from $69.0 million [7][9] Property Performance - Same property revenue decreased by $564,000, or 0.8%, and same property operating income decreased by $1.2 million, or 2.5%, for the 2024 Quarter compared to the 2023 Quarter [3][19] - The commercial portfolio was 95.2% leased as of December 31, 2024, up from 94.1% a year earlier, while the residential portfolio, excluding Twinbrook Quarter, was 98.3% leased compared to 98.0% in 2023 [6][11] Mixed-Use and Shopping Center Performance - Mixed-Use same property operating income increased by $0.6 million to $12.9 million for the 2024 Quarter, primarily due to higher residential base rent [3][20] - Shopping Center same property operating income totaled $35.3 million, a decrease of $1.8 million compared to the 2023 Quarter, mainly due to lower lease termination fees [3][19] Operational Metrics - As of December 31, 2024, the company operated a real estate portfolio of 62 properties, including 50 shopping centers and eight mixed-use properties, with approximately 10.2 million square feet of leasable area [11][12] - The company experienced higher general and administrative costs of $1.2 million and higher credit losses on operating lease receivables of $0.8 million during the 2024 Period [7][10]

Core Points - Saul Centers, Inc. announced the income tax treatment of its 2024 dividends, with a total of $2.36 per common share declared and paid [1] - For common stock dividends, 71.66% is classified as ordinary income ($1.69 per share) and 28.34% as return of capital ($0.67 per share) [1] - Preferred stock dividends are fully characterized as ordinary income [2] Company Overview - Saul Centers, Inc. is a self-managed, self-administered equity REIT based in Bethesda, Maryland, managing a portfolio of 62 properties [3] - The portfolio includes 58 community and neighborhood shopping centers and mixed-use properties, totaling approximately 10.2 million square feet of leasable area [3] - Over 85% of the company's property operating income is derived from properties located in the metropolitan Washington, DC/Baltimore area [3] Dividend Details - The company declared and paid four dividends totaling $1.53125 per depositary share on its 6.125% Series D Preferred Stock [5] - Additionally, four dividends totaling $1.50000 per depositary share were declared on its 6.000% Series E Preferred Stock [5]

Core Viewpoint - Saul Centers (BFS) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system emphasizes the importance of earnings estimate revisions, which are strongly correlated with near-term stock price movements [4][6]. - An increase in earnings estimates typically leads to higher fair value calculations by institutional investors, resulting in stock price movements [4]. Company Performance and Outlook - The recent upgrade reflects an improvement in Saul Centers' underlying business, with analysts raising their earnings estimates [5][8]. - For the fiscal year ending December 2024, Saul Centers is expected to earn $3.14 per share, representing a year-over-year change of 0.6% [8]. Zacks Rating System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks, which have generated an average annual return of +25% since 1988 [7]. - The upgrade to Zacks Rank 2 places Saul Centers in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [10][11].

Core Viewpoint - Saul Centers (NYSE:BFS) is a shopping center REIT primarily focused on the Washington DC MSA, currently trading at a discount compared to its historical FFO multiples and peers, presenting a potential investment opportunity [1][3][38] Company Overview - Saul Centers is a mid-cap REIT with a portfolio primarily consisting of shopping centers, with approximately 74.1% in shopping centers, 14.7% in office spaces, and 11.2% in apartments [5][6][7] - The majority of its properties are located in the DC/Baltimore area, which accounts for 85.6% of its portfolio [7][9] Financial Performance - The FFO multiple for Saul Centers has decreased to about 12X, which is lower than the grocery-anchored shopping center averages of 14.6X [3] - The company has shown a same-store NOI growth of over 6% in the most recent quarter, indicating strong performance in the current market [14] - The current dividend yield is approximately 6%, with a stable to growing dividend history [15][16] Growth Potential - Occupancy rates are nearly full, with growth potential primarily coming from rental rate increases, as the current rent per square foot is about $24, which is below market rates for the DC area [17][18] - Anticipated organic growth is around 5% annually, influenced by the expiration of existing leases [21] Valuation - Saul Centers is trading at a significant discount to its estimated NAV of $52.50, with its current price at $39.70 [26] - The company has higher leverage compared to peers, which affects its valuation multiples [22][25] Idiosyncratic Factors - Saul Centers operates quietly, with high insider ownership of 35.5% by the B.F. Saul Real Estate Investment Trust, which may lead to management being financially aligned with shareholders but also indicates concentrated control [30][31][33] - The company has potential buyout appeal due to its desirable property concentration in DC, making it an attractive target for other REITs or private equity [37][38]

Core Insights - Saul Centers (BFS) reported quarterly funds from operations (FFO) of $0.83 per share, exceeding the Zacks Consensus Estimate of $0.80 per share and up from $0.76 per share a year ago [1][2] - The company achieved revenues of $67.29 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 1.98% and increasing from $63.77 million year-over-year [3] - The stock has added approximately 4.3% since the beginning of the year, while the S&P 500 has gained 24.3% [4] Financial Performance - The FFO surprise for the quarter was 3.75%, with a previous quarter surprise of 7.79% [2] - Over the last four quarters, Saul Centers has exceeded consensus FFO estimates three times [2][3] - Current consensus FFO estimate for the upcoming quarter is $0.69 on revenues of $66.83 million, and for the current fiscal year, it is $3.12 on revenues of $266.24 million [8] Industry Context - Saul Centers operates within the Zacks REIT and Equity Trust - Retail industry, which is currently ranked in the top 33% of over 250 Zacks industries [9] - The performance of the stock may be influenced by the overall outlook for the industry, as top-ranked industries tend to outperform lower-ranked ones significantly [9]

Financial Performance - Net income for the third quarter of 2024 increased to $19.6 million, up from $16.7 million in the same quarter of 2023, representing a growth of approximately 17.4%[85]. - Total revenue for the three months ended September 30, 2024, increased by 5.5% to $67.288 million compared to $63.766 million in the same period of 2023[86]. - Net income for the nine months ended September 30, 2024, increased to $57.3 million from $51.6 million for the same period in 2023[88]. - Total revenue for the nine months ended September 30, 2024, increased by 5.5% to $200.923 million compared to $190.524 million in the same period of 2023[89]. - Funds From Operations (FFO) available to common stockholders for the 2024 Quarter totaled $28.9 million, an increase of 11.0% compared to the 2023 Quarter[114]. - FFO available to common stockholders for the nine months ended September 30, 2024, was $93,266,000, up from $87,790,000 in 2023, reflecting a growth of 6.3%[115]. Revenue and Rent Growth - Base rent for the three months ended September 30, 2024, rose by 4.2% to $54.332 million, driven by a $1.9 million increase in commercial base rent and a $0.3 million increase in residential base rent[86]. - Same property revenue for the three months ended September 30, 2024, increased by $3.5 million, or 5.5%, compared to the same period in 2023, primarily due to higher base rent, expense recoveries, and lease termination fees[96]. - The increase in same property revenue for the 2024 Period was $10.4 million, primarily due to higher base rent of $5.0 million[96]. - Average annualized base rent per square foot for commercial properties increased to $21.16 for the nine months ended September 30, 2024, from $20.75 in 2023, a change of 1.98%[120]. - The effective rent per square foot also rose to $19.57 in 2024, compared to $19.20 in 2023, marking an increase of 1.93%[120]. Expenses and Costs - Total expenses for the three months ended September 30, 2024, increased by 1.4% to $47.696 million from $47.055 million in the same period of 2023[87]. - Property operating expenses for the nine months ended September 30, 2024, increased by 10.2% to $30.312 million, primarily due to higher repairs and maintenance expenses[90]. - General and administrative expenses for the nine months ended September 30, 2024, increased by 8.9% to $17.565 million, attributed to higher marketing and leasing costs[92]. - Total expenses increased by 3.5% in the 2024 Period compared to the 2023 Period, reaching $143,759 thousand[90]. Development Projects - The company has a development pipeline that includes up to 3,700 apartment units and 975,000 square feet of retail and office space, primarily located near Metro stations in Montgomery County, Maryland[79]. - The total cost of the Twinbrook Quarter Phase I project is expected to be approximately $331.5 million, with $311.3 million already invested as of September 30, 2024[80]. - The Hampden House project in downtown Bethesda is expected to cost approximately $246.4 million, with $185.2 million invested to date[81]. - The development potential of the entire 18.4-acre Twinbrook Quarter site includes 1,865 residential units and 473,000 square feet of retail space[80]. Debt and Liquidity - The company's outstanding debt totaled approximately $1.51 billion as of September 30, 2024, with a weighted average remaining term of 8.7 years[79]. - The company maintains a total debt to total estimated asset market value ratio of under 50%, allowing for additional secured borrowings if necessary[79]. - The company has availability of approximately $172.6 million under its Credit Facility as of September 30, 2024[79]. - The Company was in compliance with all financial covenants as of September 30, 2024, including a leverage ratio of less than 60%[112]. - The Company expects to meet short-term liquidity requirements through cash provided from operations, available cash, and its existing line of credit[108]. Leasing and Occupancy - The commercial leasing percentage increased to 95.7% as of September 30, 2024, compared to 94.1% a year earlier, indicating improved occupancy rates[79]. - Approximately 96,200 square feet (91.6%) of the retail space in Twinbrook Quarter has been leased, with openings expected throughout 2025[80]. - The residential portfolio was 98.8% leased as of September 30, 2024, compared to 97.5% a year earlier[132]. - The leasing percentage at office mixed-use properties increased to 88.9% as of September 30, 2024, from 83.6% in 2023, showing improvement in this segment[124]. Cash Flow - Net cash provided by operating activities for the nine months ended September 30, 2024, was $92.4 million, compared to $85.0 million for the same period in 2023[104]. - Cash and cash equivalents totaled $7.2 million as of September 30, 2024, compared to $6.6 million as of September 30, 2023[103]. - The company reported a net decrease in cash and cash equivalents of $1.2 million for the nine months ended September 30, 2024, compared to a decrease of $6.7 million in the same period in 2023[104]. Stock and Incentives - The Company issued 43,452 shares under the Dividend Reinvestment Plan (DRIP) at a weighted average discounted price of $37.21 during the nine months ended September 30, 2024[110]. - The company granted 117,000 restricted shares to officers under the 2024 Stock Incentive Plan, with an estimated future expense of approximately $3.0 million related to unvested restricted stock grants[117].