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NNN REIT, INC. (NNN)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $226.8M, up 4.6% year over year and above Wall Street consensus; Core FFO/AFFO per share rose 1.2% YoY to $0.84/$0.85, while diluted EPS was $0.54 . Versus S&P Global consensus, revenue beat by $2.41M*, and Primary EPS modestly missed (0.476 vs. 0.489)*.
  • Guidance raised: Core FFO and AFFO per share midpoints up $0.01; acquisition volume lifted to $600–$700M; disposition volume now $120–$150M; real estate expenses (net of tenant reimbursements) increased to $17–$18M .
  • Balance sheet catalyst: Post-quarter issuance of $500M 4.600% senior notes due 2031, repaid revolver; pro forma liquidity ~$1.4B; sector-leading weighted average debt maturity ~11 years; no floating-rate debt .
  • Dividend catalyst: Quarterly dividend increased 3.4% to $0.60 per share, marking 36 consecutive annual increases .
  • Investment activity: $232.5M acquired at 7.4% initial cash cap rate; ABR up 6.7% YoY; occupancy improved to 98.0% .

What Went Well and What Went Wrong

What Went Well

  • Revenue beat and recurring cash flow growth: Revenues $226.8M (+4.6% YoY) with Core FFO/AFFO per share up 1.2% YoY to $0.84/$0.85 .
  • Strategic investment pace and pricing: $232.5M invested across 45 properties at a 7.4% initial cash cap rate, WALT 17.8 years .
  • Liquidity and capital structure: Issued $500M notes due 2031 and repaid revolver; pro forma ~$1.4B liquidity, no floating-rate debt; CEO: “well-positioned to raise our 2025 Core FFO guidance and execute our strategy through year end.” .

What Went Wrong

  • EPS vs consensus: S&P “Primary EPS” missed modestly (0.476 actual vs 0.489 estimate), while diluted EPS reported at $0.54; call out methodology differences .
  • Higher operating drag: Real estate expenses net of tenant reimbursements raised in guidance to $17–$18M (from $15–$16M) reflecting vacancy carry and re-leasing costs .
  • Occupancy still below prior-year peak: 98.0% at quarter-end vs 99.3% prior year as tenant resolutions continue, despite sequential improvement .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenues ($USD Millions)$216.8 $230.9 $226.8
Net earnings ($USD Millions)$106.7 $96.5 $100.5
Diluted EPS ($)$0.58 $0.51 $0.54
FFO per share ($)$0.83 $0.85 $0.84
Core FFO per share ($)$0.83 $0.86 $0.84
AFFO per share ($)$0.84 $0.87 $0.85

Results vs Estimates (Q2 2025):

MetricActual (Q2 2025)Consensus (Q2 2025)
Revenue ($USD)$226,802,000 $224,390,280*
Primary EPS ($)0.47646*0.48918*
Diluted EPS ($)0.54 —

Margins:

MetricQ4 2024Q1 2025Q2 2025
Net Income Margin %44.8064%*41.7831%*44.3245%*
EBITDA Margin %90.6784%*90.2479%*91.1248%*

Revenue Composition:

Metric ($USD Thousands)Q2 2024Q2 2025
Rental income (operating leases + direct financing + % rent + reimbursements)$216,140 $226,498
Interest & other income from real estate transactions$673 $304

Key Portfolio KPIs:

KPIJun 30, 2024Mar 31, 2025Jun 30, 2025
Number of properties3,548 3,641 3,663
Gross leasable area (sq ft)36,095,000 37,311,000 38,322,000
Occupancy rate99.3% 97.7% 98.0%
WA remaining lease term (years)10.0 9.9 9.8
ABR ($USD Thousands)$837,568 $874,301 $893,782

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net earnings per share (excl. gains/impairments/retirement)FY 2025$1.97–$2.02 $1.93–$1.98 Lowered
Real estate depreciation & amortization per shareFY 2025$1.36 $1.41 Raised
Core FFO per shareFY 2025$3.33–$3.38 $3.34–$3.39 Raised (midpoint +$0.01)
AFFO per shareFY 2025$3.39–$3.44 $3.40–$3.45 Raised (midpoint +$0.01)
G&A expenses ($M)FY 2025$47–$48 $47–$48 Maintained
Real estate expenses, net of reimbursements ($M)FY 2025$15–$16 $17–$18 Raised
Acquisition volume ($M)FY 2025$500–$600 $600–$700 Raised
Disposition volume ($M)FY 2025$80–$120 $120–$150 Raised
Quarterly dividend ($/sh)Q3 2025$0.58 (Q2) $0.60 (Q3) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Acquisition cap rates & pipelineQ4 acquisitions at 7.6% with expectation of slight compression due to competition Q2 pipeline holding around 7.4%; avoiding sub-7% large portfolios $232.5M at 7.4% initial cash cap rate; WALT 17.8 years Stable around mid-7s
Tenant credit/vacancy resolutionBadcock and Frisch’s re-leasing/dispositions with outcomes trending better than historical 70% rent recovery Vacancies resolving; embedded 60 bps credit-loss assumption; minimal tenant CapEx Elevated real estate expense guide; continued portfolio occupancy improvement to 98.0% Improving, but still a drag
Balance sheet & liquiditySector-leading 12.1-year maturity; no mortgages; self-funding model BBB+ balance sheet; ~$1.1B liquidity; 2.5% floating-rate debt Issued $500M 2031 notes; repaid revolver; ~$1.4B pro forma liquidity; no floating-rate debt Strengthened
Dividend policy35-year increase streak highlighted $0.58 dividend; 66% AFFO payout Dividend increased to $0.60; 68% AFFO payout in Q2 Continued growth
Tariffs/macroPreparedness and underwriting discipline; potential cap rate compression 85% ABR in service/nondiscretionary; comfortable with tariff impacts Not specifically expanded; macro discipline reflected in guidance Neutral/slightly cautious

Management Commentary

  • CEO: “NNN delivered another strong quarter, investing $233 million across 45 properties, at an accretive initial cash cap rate of 7.4%... we are well-positioned to raise our 2025 Core FFO guidance and execute our strategy through year end.” .
  • CFO (Q1 context on balance sheet): “Our fortress balance sheet... with sector-leading 11.6 years of term... gives strong visibility” .
  • CFO (Q4 context on re-leasing): Early Badcock resolutions showed combined re-leasing/disposition outcomes above typical 70% rent recovery; timing better than normal .

Q&A Highlights

  • The Q2 2025 earnings call transcript could not be accessed due to a database inconsistency, so Q&A highlights for Q2 are unavailable. We note from prior quarter Q&A: stable acquisition cap rates (~7.4%), cautious stance on large portfolio deals, and confidence in re-leasing progress with minimal tenant CapEx .

Estimates Context

  • Q2 2025 vs consensus: Revenue beat by ~$2.41M ($226.80M actual vs $224.39M consensus); Primary EPS modest miss (0.476 actual vs 0.489 consensus). Diluted EPS reported at $0.54 (press release), reflecting differences vs S&P “Primary EPS” methodology *.
  • Q1 2025 context: Revenue beat ($230.85M actual vs $219.90M consensus)* and Primary EPS beat (0.5156 actual vs 0.48399 consensus), aided by lower-than-planned bad debt and net real estate expenses per management .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Guidance raise and dividend increase are near-term positive catalysts; raised acquisition/disposition volumes point to an active, accretive deployment environment .
  • Watch real estate expense line: net real estate expenses raised to $17–$18M for 2025, reflecting vacancy carry and re-leasing; monitor progress as occupancy trends up .
  • Balance sheet remains a differentiator: $500M 2031 notes and revolver repayment drive ~$1.4B pro forma liquidity and remove floating-rate exposure—supporting execution without equity reliance .
  • Cash flow stability: ABR +6.7% YoY; AFFO payout ratio ~68% supports dividend sustainability and incremental growth .
  • Acquisition pricing remains disciplined (~7.4%); avoid compressed large portfolios; relationship-driven pipeline should support raised volume targets .
  • Estimate revisions: Revenue beat vs consensus should support modest upward adjustments; EPS modeling should align to S&P methodology (Primary EPS) vs reported diluted EPS*.