On Wednesday, Truist Securities adjusted its outlook on shares of Plymouth Industrial REIT (NYSE:PLYM), increasing the price target to $27.00 from the previous $26.00 while reaffirming a Buy rating for the company's stock. The adjustment comes in light of Plymouth Industrial REIT's recent deal with Sixth Street, which the analyst firm views positively for several reasons.
The transaction with Sixth Street has provided Plymouth Industrial REIT with approximately $500 million in "dry powder," which can be leveraged at an estimated 30% to finance accretive acquisitions. The cost of capital for these potential deals is expected to be around 6.5%, according to the analyst's estimates.
Moreover, the cap rate associated with the Chicago portfolio acquired in the deal is reported to be significantly lower than Plymouth's implied cap rate of roughly 7.4%.
The deal is also noted as leverage-neutral, meaning it does not significantly alter the company's existing debt levels. Moreover, it has the effect of reducing Plymouth's exposure to its legacy assets in Chicago. This strategic capital injection is set to empower Plymouth Industrial REIT to actively pursue lucrative opportunities within its acquisition pipeline, which is valued at around $3 billion.
Truist Securities has maintained its Buy rating on Plymouth Industrial REIT's stock, citing the attractive valuation of the company. The analyst firm anticipates robust earnings growth for Plymouth, supported by both market-to-market (MTM) opportunities and the potential for external growth through strategic acquisitions.
In other recent news, Plymouth Industrial REIT has secured a strategic partnership with global investment firm Sixth Street, which includes a $250 million investment aimed at propelling Plymouth's growth in the industrial real estate sector. This agreement is designed to provide Plymouth with capital to pursue acquisitions and joint venture opportunities.
As part of the deal, Sixth Street will own 65% of Plymouth's Chicago portfolio and make a $140 million non-convertible preferred equity investment into Plymouth's Operating Partnership.
In addition, Plymouth Industrial REIT disclosed robust Q2 2024 financial results, demonstrating improved financial health with leverage decreasing to 6.4 times. The company also reported about 2 million square feet of leases in progress and high tenant interest in renewals. Despite a temporary dip in occupancy, the company expects a rebound to around 98% by year-end.
Truist Securities updated its outlook on shares of Plymouth Industrial REIT, raising the price target while maintaining a Buy rating. The adjustment reflects a positive view on the company's recent leasing activities and a lower interest rate environment. The firm also reaffirmed the 2024 normalized funds from operations (FFO) estimate at $1.88 per share, aligning with the lower end of the company's guidance range.
InvestingPro Insights
In the context of Plymouth Industrial REIT's (NYSE:PLYM) recent deal and the price target adjustment by Truist Securities, current InvestingPro data provides additional insights into the company's financial health and market performance.
As of the latest data, Plymouth Industrial REIT has a market capitalization of $1.12 billion and is trading at a P/E ratio of 45.41, which might be considered high relative to near-term earnings growth. However, with a PEG ratio of just 0.22 in the last twelve months as of Q2 2024, this indicates potential for earnings growth relative to the P/E ratio.
The company has also demonstrated a solid return, with a 21.72% price total return over the last three months, suggesting strong recent performance. This aligns with one of the InvestingPro Tips that highlights Plymouth's strong return in the recent quarter. Moreover, analysts predict the company will be profitable this year, supported by a profitable performance over the last twelve months.
Investors considering Plymouth Industrial REIT may find these metrics particularly relevant as they reflect the company's recent financial performance and market valuation. For a deeper dive into Plymouth's financials and to explore additional InvestingPro Tips, which include a total of 8 tips for PLYM, visit https://www.investing.com/pro/PLYM.
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