Realty Income Earnings Show Why It��s the Right Kind of Retail Stock

Leading net-lease retail REIT Realty Income (NYSE:O) recently reported its second-quarter earnings, and as usual, there weren't any major surprises. Earnings growth, occupancy, and most other key metrics were predictably strong -- a breath of fresh air, given the turbulence in some parts of the retail industry.

With that in mind, here are some of the important takeaways from Realty Income's second quarter that show why it's one of the best retail stocks for an uncertain retail environment.

Non-discretionary tenants like drug stores have helped Realty Income grow despite e-commerce headwinds in the sector. Image source: Getty Images.

Solid growth in a challenging retail environment

It's no secret that the brick-and-mortar retail environment, as a whole, is rather challenging right now. There have been dozens of retail bankruptcies in recent years, and many once-great retail brands like Sears and JCPenney are struggling to survive.

However, not all retailers are in the same boat. The businesses that occupy the properties in Realty Income's portfolio aren't too vulnerable to e-commerce headwinds, nor are they particularly prone to recessions. Think of non-discretionary businesses such as drug stores, discount-oriented retail like dollar stores, and experiential retail like movie theaters.

As a result, by looking at Realty Income's numbers, you'd never know brick-and-mortar retail is struggling. Adjusted FFO�-- the REIT version of earnings -- increased by more than 5% per share over the past year, and revenue is up by nearly 10%.

Occupancy has gotten better, not worse

In addition to the solid growth, Realty Income's occupancy rate shows that it isn't losing tenants to the "retail apocalypse" that many investors are panicked about. Occupancy has actually increased slightly. In fact, 98.7% of Realty Income's properties are now occupied, up from 98.6% at the end of the first quarter and 98.5% a year ago.

Turnover has been minimal, as well. Fifty-seven leases expired during the second quarter, and Realty Income released more than 80% of them. Of the 47 properties Realty Income released during the second quarter, 46 of them were to the same tenants who had been occupying them.

Realty Income is buying more properties than expected

Another encouraging sign is that Realty Income seems to be finding plenty of attractive growth opportunities. The company spent $347 million on acquisitions during the quarter and is dramatically increasing its full-year acquisition guidance to $1.75 billion from a range of $1.0 billion-$1.5 billion previously. Many other REITs are taking a breather on expansion, so this is certainly a positive indicator for the net-lease retail real estate industry.

As a result of the stronger-than-anticipated performance during the second quarter, as well as the attractive acquisition environment, Realty Income has increased its full-year AFFO guidance by $0.015 at the midpoint.

As usual, Realty Income does predictably well

I follow Realty Income's stock, and coming from my perspective, the company's earnings reports are generally quite boring and predictable -- and in the best possible way. No matter what is going on in the economy, retail industry, or the rest of the stock market, Realty Income typically delivers solid and steady growth quarter after quarter and has a knack for doing just a little bit better than the market is expecting every time.

Because of its predictably growing income, Realty Income has been able to increase its monthly dividend 97 times since its 1994 NYSE listing. And because of its highly effective growth strategy, the company has delivered 15.8% annualized returns throughout its listed history. This means that a $10,000 investment made at the time of the NYSE listing would have ballooned to more than $338,000 today. While Realty Income's results may be boring and uneventful over short time periods, over the long term, steady growth can be quite exciting.

Buy ICICI Bank; target of Rs 360: Centrum Research

Centrum Research's research report on ICICI Bank

We retain BUY on ICICI Bank with SOTP based TP unchanged at Rs360. Q1��19 results were broadly in-line with our estimates on operational / asset quality front. Core operating profit remains healthy (+13% YoY); new NPA addition moderates (slippages at 3.1% of loans) and loan growth (+11% YoY) gathers pace. Drill-down list (<1% of loans) coupled with BB and below-rated portfolio (5% of loans) remain the new watch-list. We see provisions remain elevated in the near term (FY19E); however draw comfort in pace of resolution and ~69% coverage ratio (combined) against list-1 and list-2 IBC accounts. Capital position remains healthy; subsidiaries remain profitable. Valuations continue to remain undemanding.

Outlook

We have tweaked our FY19E/FY20E estimates on other income / credit cost front. Our SOTP-based TP, however remains unchanged at Rs360 (valued core business at 2x FY20E ABV and other business accordingly).

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Read More First Published on Aug 3, 2018 03:45 pm

Teladoc's Second Quarter Shows Signs of Scalability

Our U.S. healthcare system costs $3 trillion per year, and we're getting eager to save costs in any way we can.�

One increasingly popular way to do that is through telemedicine. Hospital emergency rooms are becoming unnecessarily overcrowded, and routine checkups for many common conditions can often now be diagnosed remotely.

Teladoc�(NYSE:TDOC) is rising as a leader in this field. Now facilitating more than 530,000 appointments each quarter, Teladoc has become America's largest provider of virtual medical consultations. The company makes money�by charging insurers and employers recurring subscription access fees but also by charging patients per-visit fees (which typically run from $40 to $80).

Teladoc's recent acquisition of Best Doctors is helping it get a jump on competitors in this fast-moving space.�Let's take a closer look at its second-quarter results.

Image source: Getty Images

Teladoc results: The raw numbers

Metric

Q2 2018

Q2 2017

Change (YOY)

Revenue	$94.6 million	$44.6 million	112%
Operating income	($18.1 million)	($14.5 million)	N/A
Earnings per share	($0.40)	($0.28)	N/A

Data source: Teladoc. Earnings per share is on a fully diluted basis.

What happened this quarter?

Teladoc demonstrated strong top-line growth as more members joined the platform and others came aboard from their Best Doctors acquisition.

The 112% revenue growth largely came from the acquisition of Best Doctors. Organically, Teladoc grew 39% in the second quarter. Driving the top-line growth was revenue from Subscription Access Fees (subscriptions paid by insurers), which increased 113% to $79.8 million. This comprised 84% of total revenue. Teladoc also expanded overseas. Revenue from International Subscription Access Fees was $14.7 million, compared to zero last year.�� Revenue from Visits (per-visit fees, paid either by insurers or directly by patients) was $14.8 million, an increase of 107%. The total number of visits was 533,000. This was up 72% over the second quarter of 2017. Total U.S. paid membership�was 22.5 million, up 48% over last year. After taking out the membership gained through the Best Doctors acquisition, membership grew 23% organically. Utilization, which is defined as quarterly visits divided by total paid U.S. membership, was 8% (533,000 visits/22.5 million members, then multiplied by 4 to annualize). This is significantly higher than the 6.1% utilization rate last year. Adjusted�EBITDA�(which removes stock-based compensation and acquisition-related costs) was $2.7 million, compared to ($5.1) million in the second quarter of last year.� What management had to say

Teladoc CEO Jason Gorevic took a chance to describe Teladoc's bigger-picture opportunity:

Teladoc saw another strong quarter financially and operationally as we met or exceeded our expectations across the board. I'm particularly pleased that we made significant�early�progress on the integration of Advance Medical, which empowers consumers to access high-quality healthcare seamlessly around the world.

As we enter the second half of the year, I am excited by the breadth of our pipeline, our prospects' level of enthusiasm around our full clinical suite, and the changes coming�out of Washington, DC, which all serve as further evidence that virtual care is an invaluable component of the healthcare delivery system of the future.� � � ��

Looking forward

It's great to see Teladoc bringing in new members via the Best Doctors acquisition, which contributes more top-line subscription revenue. But it's also important to see its utilization rate improve, which is a sign that members actually understand and are using the platform.�

One other thing worth noting is that this was Teladoc's first quarter of reporting positive adjusted EBITDA. This validates that its business model can be profitable and is capable of scaling further as subscription and fee revenues outpace costs.

Teladoc is in hypergrowth mode, and management's acquisitions are positioning it to capitalize on what could be a very large market opportunity. Investors should continue to watch for growth in membership, utilization, and profitability.