On Tuesday, RBC Capital Markets adjusted its price target for Agree Realty Corporation (NYSE:ADC) shares, lowering it to $79 from the previous $80 while maintaining an Outperform rating. Currently trading at $70.42 with a market capitalization of $7.27 billion, ADC appears to be trading above its InvestingPro Fair Value. The revision came after the firm's analysis of the real estate investment trust's (REIT) recent acquisitions and future investment guidance.
Agree Realty's 2024 acquisition volumes modestly exceeded both the company's guidance and RBC Capital's estimates. The REIT acquired properties worth $867 million in 2024, surpassing the anticipated $850 million.
In the fourth quarter of 2024 alone, Agree Realty's acquisitions totaled $341 million, which was above RBC Capital's estimate of $325 million. The capitalization rate (cap rate) for these acquisitions remained consistent at 7.3%.
Moreover, 73.3% of the company's investment grade weighting was attributed to the fourth quarter, and 10.5% of annualized base rent (ABR) stemmed from ground leases. The company's strong acquisition strategy has contributed to impressive revenue growth of 17.78% over the last twelve months, according to InvestingPro data.
Looking ahead, Agree Realty has provided guidance for 2025 investment volumes to be between $1.1 billion and $1.3 billion. This forecast falls slightly short of RBC Capital's prior midpoint estimate of $1.325 billion.
Despite this, the firm notes that Agree Realty typically adopts a conservative stance at the beginning of the year, with the potential to increase guidance as the year progresses. The company's conservative approach has helped maintain its impressive 31-year streak of consistent dividend payments, with 12 consecutive years of dividend increases. Currently, ADC offers a competitive dividend yield of 4.31%.
RBC Capital's estimates for Agree Realty's adjusted funds from operations (AFFO) per share for the fourth quarter of 2024 and the full year of 2025 remain unchanged. However, the projection for 2026 AFFO per share has been reduced by $0.03, attributed to an anticipated rise in the cost of capital. This increased cost of capital is also the reason behind the $1 reduction in the price target for Agree Realty's stock.
The analyst from RBC Capital concluded that while the higher cost of capital has necessitated a slight adjustment in the longer-term estimates and price target, the overall performance and guidance from Agree Realty demonstrate a solid acquisition strategy and a conservative approach to growth projections.
InvestingPro analysis supports this view, showing a GOOD overall Financial Health Score of 2.92, with particularly strong ratings in cash flow and growth metrics. For deeper insights into ADC's financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Agree Realty Corporation has been the subject of several analyst upgrades and significant financial developments. Agree Realty's recent earnings call revealed a 4.6% year-over-year growth in its AFFO per share guidance, which was raised to $4.12-$4.14. Evercore ISI set Agree Realty's stock to outperform, giving it a price target of $82, citing the company's proven execution track record and substantial growth opportunities.
Baird also raised its price target for Agree Realty to $76, while RBC Capital Markets set its price target to $80, both maintaining an Outperform rating. These upgrades came after Agree Realty successfully raised over $1 billion of equity, which is expected to fund its growth initiatives and provide a buffer against short-term market volatility.
Agree Realty also closed a stock offering, issuing more than five million shares at $74 per share, and announced a $1.25 billion at-the-market equity program. These moves are expected to bolster the company's continued growth and real estate investment.
Furthermore, the company initiated a public offering of four million shares of common stock, intended for general corporate activities, including property acquisitions, development, or debt repayment. These recent developments underline Agree Realty's strategic efforts to secure funding, expand its portfolio, and fortify its financial position.
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