NNN REIT, Inc. (NNN) Earnings & Analysis

Latest quarter

NNN reported Q2 FY2026 revenue of $244.3 million, up from $226.8 million a year earlier. On the basis used for the consensus comparison, revenue was $242.7 million, below the $243.0 million consensus. Adjusted earnings per share were $0.90 against a consensus of $0.89.

The company’s filing attributed higher rental income primarily to revenue from recent property acquisitions. It also said general and administrative expenses rose, principally because of compensation costs, while depreciation and amortization increased as acquisitions expanded the property portfolio. Interest expense increased as well.

NNN’s gross margin was 96.6%, compared with 96.1% a year earlier, while its operating margin was 62.0%, compared with 66.0%. The filing said non-reimbursed real estate expenses fell primarily because the company had fewer vacant properties.

Diluted earnings per share were $0.52, down from $0.54 a year earlier. NNN’s free cash flow was −$107.9 million, compared with −$51.7 million in the prior-year quarter.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Steve Horn said NNN’s portfolio occupancy increased from the first quarter and a year earlier. CFO Vin Chao said higher occupancy reduced net real estate expenses, while lower-than-expected bad debt was the primary reason results exceeded the company’s internal projections. Chao described near-term tenant credit concerns on the company’s watch list as immaterial and said the portfolio team was addressing potential future risks through asset sales, lease terminations and leasing.

Horn said NNN invested in new properties during the quarter, primarily in auto service, discount retail and early childhood education. He said the company’s approach remains focused on direct sale-leaseback transactions with existing tenant relationships. NNN also sold properties, including vacant assets, and Horn said it intended to remain active in dispositions during the year.

In the question-and-answer session, Horn addressed acquisition opportunities and competition. He said NNN had built its pipeline ahead of the quarter and continued to see activity for the rest of the year. He described competition from other public REITs as familiar, adding that NNN was encountering little private capital, though that could change. Horn said some deals with existing tenants required slightly lower acquisition cap rates than in the first half, and he anticipated modest cap rate compression in the second half.

Chao said NNN had visibility into its live acquisition deals but tended to place more speculative activity later in its planning. On funding, he said NNN increased its term loan to $500.0 million during the quarter and used proceeds from settled forward shares to pay down its revolving credit facility. Chao also said the company expected free cash flow, property sales and unsettled forward equity to provide funding for its objectives.

Guidance

NNN raised its FY2026 adjusted funds from operations guidance to $3.55 to $3.59 per share, from $3.53 to $3.59 previously. Chao said the company also raised the midpoint of its core FFO guidance, citing quarterly performance, higher expected acquisitions and lower expected net real estate expenses.

Horn raised the acquisition guidance midpoint to $750.0 million and the disposition guidance midpoint. Chao said NNN now expects full-year bad debt of about 0.40%, down from its prior assumption, and the company increased its expected FY2026 free cash flow to $215.0 million.