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Analysts’ views carry a great deal of weight on Wall Street. Therefore, investors can expect that if an analyst upgrades a stock or maintains a previous rating while increasing the price target, the share price will likely rise.
Often, significant company news is required for an analyst to upgrade a stock or raise price targets. It’s also noteworthy when other analysts have reduced the price target or downgraded a stock and a new analyst reverses that trend.
Take a look at three real estate investment trusts (REITs) from different subsectors that just received new price targets:
Crown Castle Inc. (NYSE:CCI) is a Houston, TX-based specialized REIT that owns, operates, and leases cell towers long-term. It owns more than 40,000 cell towers, 90,000 route miles of fiber and 115,000 small cells. Crown Castle designs and builds wireless coverage and custom fiber optic networks for businesses and governments.
The past several months have been difficult for Crown Castle, as the Board has battled with an activist investor group led by former CEO Ted Miller and Elliott Investment Management. Miller criticized the Board and Crown Castle management for disappointing shareholders by underperforming over several years. The public notices to shareholders grew so heated that the board was forced to withdraw new CEO Steven Moskowitz’s name from consideration as a board member to avoid a lawsuit from Ted Miller.
Miller correctly assessed that the REIT’s share price has performed badly. In early January of 2022, Crown Castle traded near $188. It recently closed at $99.10. On May 30, Jim Cramer of CNBC’s “Mad Money” show backed Miller’s view when he recommended avoiding Crown Castle while noting that it’s been mismanaged.
Fortunately, the board finally decided to take some action. On June 11, Crown Castle announced it would make operational changes, including reducing Capex by $275-$325 million in its heavily criticized Fiber segment and saving another $60 million in expenses by laying off 10% of its staff and closing some offices. It further noted it’s reviewing its Fiber and small cell divisions with plans to increase revenues in those areas.
One analyst was impressed with the Board’s statement. On June 14, Raymond James analyst Ric Prentiss reiterated Crown Castle with an Outperform rating and raised the price target from $124 to $126. The analyst probably liked what he heard from the June 11 announcement. This is significant because several analysts slashed price targets on Crown Castle in April and May 2023. Wells Fargo analyst Eric Luebchow lowered the price target from $115 to $100 and RBC Capital analyst Jonathan Atkin cut it from $109 to $100.
Essex Property Trust (NYSE:ESS) is a residential REIT that owns and operates 254 apartment communities with over 62,000 units across the West Coast states of California and Washington. Essex is a member of the S&P 500 and a Dividend Aristocrat, with 30 years of increasing dividends.
On April 30, Essex Property Trust reported first quarter funds from operations (FFO) of $3.83 per share, beating the consensus estimate of $3.75. However, its revised FFO guidance for full-year 2024 of $15.03-$15.43 missed the estimate of $15.52.
Nevertheless, on June 14, Scotiabank analyst Nicholas Yulico maintained Essex Property Trust with a Sector Outperform rating and raised the price target from $283 to $285. This was analyst Yulico’s second price target raise on Essex within the past month.
Two other analysts, James Feldman of Wells Fargo and Vikram Malhotra of Mizuho, recently maintained Essex at Equal-Weight and Buy. Feldman raised the price target from $232 to $269 and Malhotra increased it from $250 to $266.
Health care Realty Trust Inc (NYSE:HR) is a Nashville, TN-based health care REIT with 687 properties covering 40.3 million square feet across 35 states. Established in 1992 with only 21 facilities, it has evolved into a delivery model in which 72% of its properties are multi-tenant medical outpatient service buildings on the campus of hospitals or other health care facilities. Its first quarter occupancy rate was 92.8%, a vast improvement from 85.2% in 2023.
In 2022, Healthcare Realty merged with Healthcare Trust of America in an $18 billion deal, becoming Healthcare Realty Trust. The top locations of its properties include Dallas, Seattle and Houston.
On May 7, Healthcare Realty reported a first quarter 2024 FFO of $0.39 per share, beating the consensus estimate of $0.38 but slightly declining from $0.40 per share in Q1 2023. Revenue of $326.81 million was just below the consensus estimate of $326.89 million, down from $332.93 million in Q1 2023.
Health care Realty also affirmed its previous full-year 2024 FFO guidance of $1.52-$1.58, matching the consensus estimate.
On June 14, Wells Fargo analyst Joseph Feldman maintained Healthcare Realty Trust at Equal Weight and raised the price target from $16 to $17. This was the second time analyst Feldman raised the price target by one dollar in the past two weeks and bodes well for Healthcare Realty going forward.
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