Phillips Edison & Co. (PECO) Income Statement

Revenue growth has consistently accelerated from 6.2% in 2024Q1 to 10.4% in 2025Q3, and while 2026Q2 shows a slight deceleration to 6.0% sequentially, the year-over-year trend remains robust. This suggests strong pricing power and successful lease-up of small-shop space, which typically carries higher rents. The sustained growth above 10% for most of 2025 indicates that PECO is capturing favorable market conditions in grocery-anchored retail, likely benefiting from suburban migration trends and the essential nature of its tenant base.

Excluding the anomalous 2026Q2 NOI figure, which likely reflects a one-time gain or accounting adjustment, NOI margins have been remarkably stable, ranging from 70.4% to 71.9% over the past two years. This stability suggests that PECO effectively manages property operating expenses and passes through costs to tenants via reimbursement structures. The negative gross margin reported in the snapshot is inconsistent with the strong NOI margins, warranting further investigation into expense categorization, but it does not appear to reflect a structural deterioration in property-level profitability.

FFO growth has been consistently strong, with 2025Q4 showing a 55.9% year-over-year increase, and 2026Q2 continuing at 31.9%. This growth is driven by both revenue expansion and margin stability, but also reflects the non-cash nature of depreciation and amortization. AFFO, which accounts for recurring capital expenditures, has also grown, though at a slower pace, suggesting that maintenance capex is consuming a portion of cash flow. The dividend yield remains low at 0.8%, indicating that PECO retains most of its cash flow for reinvestment, which supports future growth but may limit income appeal.

The gap between net income and FFO is substantial, with depreciation and amortization charges consuming a large portion of GAAP earnings. For example, in 2026Q2, net income was $41.1M while FFO was $108.0M, implying depreciation of approximately $67M. This is typical for REITs, as real estate assets are depreciated over long useful lives, but it underscores that GAAP net income understates the economic earnings power of the portfolio. Investors should focus on FFO and AFFO to assess true cash-generating ability, while monitoring whether depreciation charges align with actual asset value declines.

While same-store NOI is not explicitly provided, the consistent revenue growth and stable NOI margins suggest that organic performance is strong. The 10.7% revenue growth in 2025 likely reflects both rent escalations and occupancy gains, particularly in small-shop space. The high retention rate of grocery anchors and the necessity-based tenant mix provide a stable base for same-store growth. However, investors should monitor re-leasing spreads, as new leases may be signed at lower rents than expiring leases if market conditions soften, which could pressure future same-store NOI.