On Friday, EastGroup Properties (NYSE:EGP) saw its price target reduced by Mizuho to $175 from $185, while the firm maintained a Neutral stance on the stock.
The adjustment comes amid expectations of higher net operating income (NOI) growth driven primarily by increased rental revenue.
This anticipated growth is slightly tempered by reduced incremental NOI from the company's acquisitions, dispositions, and developments.
The revised price target also factors in higher rent spreads, which are supported by projections of rent growth. Mizuho's analysis includes an assumption of a robust 7% same-store NOI (SS-NOI) growth for the fiscal year 2025. Additionally, the firm expects EastGroup Properties to initiate fewer new projects funded through equity.
The financial model also anticipates a slight decrease in interest expenses due to prevailing rate conditions, which is expected to be partially offset by an increase in general and administrative (G&A) costs.
Mizuho's Base Case price target of $175 is derived by applying a target capitalization (cap) rate to the company's forecasted 12-month forward NOI.
The target cap rate used is 5.2%, which aligns with current market levels. This cap rate applied to the projected NOI underpins the rationale behind the new price target for EastGroup Properties.
The adjustments to the financial outlook and price target reflect the latest expectations for the company's financial performance and real estate market conditions.
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