Evercore ISI has adjusted its outlook on Rexford Industrial Realty (NYSE: REXR), decreasing the price target to $55.00 from the previous $58.00.
Despite the reduction, the firm maintained its Outperform rating on the stock, suggesting confidence in its future performance.
The firm's analysis indicates an expectation for Rexford Industrial Realty to deliver growth surpassing the real estate investment trust (REIT) sector by at least 200 basis points in the upcoming year.
The assessment is grounded in the company's robust financial position, characterized by a strong balance sheet and lower-than-average leverage.
Evercore ISI's perspective underscores the potential for investors who are willing to adopt a long-term view, particularly over a 12-month period. The firm anticipates that the supply-demand balance within the market will normalize in the second half of 2025, which should subsequently benefit those holding Rexford Industrial Realty shares.
The current market valuation places Rexford at an adjusted funds from operations (AFFO) multiple of 21 times, aligning with the average for REITs. This valuation comes in the wake of a significant price decline, yet it is expected that the company's growth rate will outpace the sector's average.
In other recent news, Rexford Industrial Realty reported a 5.4% year-over-year increase in funds from operations (FFO) per share for the third quarter, reaching $0.59. The company also raised its full-year 2023 FFO guidance to $2.33 to $2.35 per share, indicating a 7% year-over-year growth. Rexford made $130 million in investments during and after Q3 and maintains a portfolio occupancy of 97.6%.
However, the company noted a slowdown in tenant decision-making due to macroeconomic uncertainties and a 7.5% year-over-year drop in market rents. Despite these challenges, Rexford remains optimistic, with strong leasing activity and positive net absorption reported. The company is also projecting $222 million in internal cash NOI growth over the next three years.
InvestingPro Insights
Rexford Industrial Realty's financial metrics and market performance offer additional context to Evercore ISI's analysis. According to InvestingPro data, the company's revenue growth stands at 18.01% over the last twelve months, with a robust gross profit margin of 77.49%. This aligns with Evercore's expectation of Rexford outperforming the REIT sector in growth.
An InvestingPro Tip highlights that Rexford has raised its dividend for 12 consecutive years, which may appeal to income-focused investors looking for steady returns. The current dividend yield is 3.72%, with a dividend growth of 9.87% over the last twelve months, potentially offsetting some of the short-term market volatility mentioned in the article.
While the article notes the company's strong financial position, InvestingPro data confirms that Rexford's liquid assets exceed short-term obligations, reinforcing the firm's financial stability. This factor could be crucial as the market awaits the anticipated normalization of supply-demand balance in late 2025.
For investors considering Rexford's long-term potential, it's worth noting that InvestingPro offers 7 additional tips that could provide further insights into the company's prospects. These tips, along with real-time metrics, can be valuable for those looking to make informed investment decisions in the dynamic REIT sector.
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