W. P. Carey & Co. Downgraded to Market Perform Following Stock Decline
Raymond James cites credit issues and non-renewal as concerns
On Monday, investment banking company Raymond James downgraded W. P. Carey & Co. from Outperform to Market Perform after the company’s stock experienced a notable decline last Friday. The stock saw a drop of 6.5% following the announcement of W. P. Carey’s fourth-quarter earnings and the subsequent conference call.
Initially, the earnings report appeared satisfactory as the company narrowed and maintained its 2024 Adjusted Funds From Operations (AFFO) guidance. W. P. Carey also reported continued investment activity, with $346 million in transactions during the fourth quarter and $177 million year-to-date. The sale of on-balance sheet office properties also showed progress, reducing office assets to less than 3% of the company’s total Annual Base Rent (ABR).
However, further analysis revealed some concerns. The company’s investment volume guidance increased by $250 million, indicating the expectation of more profitable transactions. The timeframe for the remaining office sales was extended to the first half of 2024, and the company unexpectedly received a $3 million dividend from Lineage Holdings. Despite these favorable factors and lower interest rates, the AFFO guidance remained unchanged.
During the conference call, several credit issues and one large non-renewal were disclosed, causing the stock to drop from $60 to under $57 by midday. Investors were surprised by the updated 2024 guidance, realizing it would have been lower without the positive adjustments. This sell-off in the stock is concerning in the net-lease sector.
With a current Market Cap of $12.55B and a strong Gross Profit Margin of 91.96% in the last twelve months, W. P. Carey demonstrates an impressive ability to generate earnings compared to its revenue. However, the stock has faced significant volatility, as indicated by a one-month Price Total Return of -14.83%.
Currently, the stock is in oversold territory, which could present an opportunity for investors. This assessment is based on the Relative Strength Index (RSI), a momentum oscillator that measures the speed and change of price movements. Additionally, W. P. Carey has a strong track record of shareholder returns, having maintained dividend payments for 26 consecutive years. The current Dividend Yield stands at 6.0%.
While the company’s P/E Ratio is 17.49, indicating a relatively high valuation, it’s worth considering the stock’s near-term earnings growth. Analysts anticipate profitability for W. P. Carey this year, which is supported by the company’s previous profitability over the last twelve months.
Analyst comment
Overall, the news can be evaluated as negative for W. P. Carey & Co. The downgrade and concerns raised by Raymond James regarding credit issues and non-renewal have led to a notable decline in the company’s stock. However, the stock is currently in oversold territory, presenting a potential opportunity for investors. Short term earnings growth is anticipated, supported by the company’s previous profitability and strong dividend history. The market for W. P. Carey is expected to remain volatile in the net-lease sector.
