On Monday, an analyst at B.Riley adjusted the price target for Essential Properties Realty Trust (NYSE: NYSE:EPRT) to $29.50, up from $29.00, while maintaining a Buy rating on the stock. The revision follows Essential Properties' first-quarter earnings for 2024, which showcased the real estate investment trust's (REIT) strong performance despite a challenging economic climate.
The analyst noted that Essential Properties trades at the highest 2025 estimated adjusted funds from operations (AFFO) per share multiple among its retail-focused single-tenant net lease (STNL) REIT peers. However, it also has the highest expected AFFO per share growth for 2025 among these peers. The combination of these factors is considered logical, but the analyst emphasizes that the relative certainty of Essential Properties' growth outlook is currently undervalued. This certainty is expected to further enhance the REIT's premium multiple.
Essential Properties demonstrated its ability to scale investment activity in the uncertain interest rate environment of the first quarter of 2024. The REIT reported record investment volumes for a first quarter, contrasting with reduced acquisition activity among its peers. The company's financial position supports continued growth, with $184.2 million of unsettled forward equity and low leverage, allowing for accretive funding of transactions without immediate dependence on capital market conditions.
The REIT's broad portfolio rent coverage has remained healthy, even amidst economic challenges, and notably, Essential Properties has no exposure to high-profile troubled tenants or those planning store closures, such as Red Lobster or Family Dollar.
While there is an expectation that cap rates may not improve significantly in the near term, with management projecting yields on near-term investments to stay steady compared to the first quarter of 2024, the analyst believes the size and certainty of Essential Properties' growth outlook will prevail over this concern.
In conclusion, the analyst reaffirmed a Buy rating for Essential Properties Realty Trust, citing the company's robust yield on acquisitions and its strong position for continued growth in a fluctuating interest rate landscape. The slight increase in the price target reflects confidence in the REIT's potential for future performance.
InvestingPro Insights
Following the recent earnings release and subsequent analyst commentary, Essential Properties Realty Trust (NYSE: EPRT) has shown a robust operational performance. InvestingPro data indicates a strong market position, with a market capitalization of $4.5 billion and a P/E ratio of 24.94, suggesting investor confidence in the company's profitability. Additionally, the company's revenue growth over the last twelve months as of Q1 2024 stands at an impressive 26.44%, underlining its solid financial growth trajectory.
An InvestingPro Tip highlights that Essential Properties has raised its dividend for 6 consecutive years, reflecting a commitment to shareholder returns even in challenging economic times. Moreover, the company's liquid assets surpass its short-term obligations, providing financial stability and flexibility. For investors looking for more insights, there are 6 additional InvestingPro Tips available, which can be accessed with a subscription. To enhance your investment strategy, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
The company's trading near its 52-week high and analysts' anticipation of sales growth in the current year further support the positive outlook conveyed by B.Riley's analyst. With a dividend yield of 4.44% and a history of profitability, Essential Properties Realty Trust stands out as a compelling investment option in the REIT sector.
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