On Monday, Piper Sandler adjusted its outlook on shares of Nexpoint Real Estate (NYSE: NREF), reducing the price target to $14 from the previous $16 while maintaining a Neutral rating. The adjustment comes after Nexpoint Real Estate reported core earnings that fell short of expectations, influenced by a $25 million loss attributed to accelerated amortization expenses stemming from the early repayment of a $500 million single-family rental (SFR) loan.
Nexpoint's second-quarter guidance for 2024 also came in below the anticipated $0.50 dividend. During the earnings call, management expressed confidence in the current dividend level, although they indicated that dividend coverage might not be achieved until later in the year. Notably, the company stands out for having no loans in forbearance and avoiding credit issues that have affected other industry peers.
Piper Sandler has subsequently revised its core earnings estimates for Nexpoint Real Estate, bringing down the forecast for 2024 and 2025 to $1.03 and $1.99 per share, respectively, from the prior estimates of $1.08 and $2.02.
The new price target is based on approximately 85% of the firm's 2024 book value estimate, a decrease from the earlier 90%. This reduction in the target multiple reflects the uncertainty surrounding the redeployment of capital in the current market environment and the projection of delayed dividend coverage.
InvestingPro Insights
As investors digest the revised outlook from Piper Sandler on Nexpoint Real Estate, a glance at real-time data from InvestingPro provides additional context. The company's market capitalization currently stands at $298.96 million, and despite the challenges, it offers a substantial dividend yield of 17.94%, signaling a commitment to returning value to shareholders. This aligns with the InvestingPro Tip that Nexpoint has raised its dividend for four consecutive years. Additionally, the company's revenue has seen a decline over the last twelve months by 24.62%, reflecting some of the headwinds mentioned in the earnings report.
InvestingPro Tips suggest a mixed financial picture. On one hand, net income is expected to grow this year, and analysts predict the company will be profitable within the year, which may reassure investors looking for long-term growth. On the other hand, two analysts have revised their earnings downwards for the upcoming period, and a sales decline is anticipated in the current year. These insights suggest that while there are positive aspects, such as dividend growth and profitability expectations, investors should also be aware of the potential for earnings and sales headwinds.
For those seeking a more comprehensive analysis, there are additional InvestingPro Tips available at: https://www.investing.com/pro/NREF. And for a limited time, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to exclusive insights that could further inform investment decisions.
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