On Tuesday, BTIG updated its outlook on KKR Real Estate Finance Trust (NYSE: KREF), raising the price target to $13.00 from the previous $11.50 while maintaining a Buy rating on the stock.
The adjustment follows a week of varied second-quarter earnings results within the commercial mortgage REIT (cmREIT) sector, which saw KREF perform strongly.
KREF's stock rose as the company demonstrated stability in its watchlist and successfully resolved a real estate-owned asset, expected to generate incremental interest income. In contrast, Blackstone Mortgage Trust (NYSE: NYSE:BXMT) faced challenges with additional watchlist migrations, indicating potential ongoing uncertainties. Meanwhile, Ladder Capital (NYSE:NYSE:LADR) reported positive results from the sale of three multifamily assets at prices above their basis and is shifting towards a more offensive strategy.
BTIG highlighted five key observations from the week's earnings: increased transaction activity signaling a growing market, multifamily sector's resilience with lower than anticipated loss exposure.
The firm's attention is now turning to upcoming earnings releases, with BrightSpire Capital (NYSE:BRSP) and TPG Real Estate Finance Trust (NYSE:TRTX) set to report after the market closes on July 30, and Franklin BSP Realty Trust (NYSE:FBRT) following on July 31. BTIG is particularly interested in companies' handling of troubled loans in the fourth quarter of 2023 and the first quarter of 2024, the durability of multifamily loan portfolios, and the capacity to deploy additional capital.
KREF disclosed mixed results for Q2 2024, with a GAAP net income of $20.2 million, or $0.29 per share, countered by distributable losses of $108.7 million, or negative $1.57 per share. These losses were significantly influenced by realized losses of $136 million. Despite these losses, KREF reported a slight uptick in book value per share to $15.24 and a reduction in its CECL allowance.
It recently reported a robust lending pipeline valued at over $20 billion and a strong liquidity position exceeding $644 million, indicating KREF's strategic focus on favored asset classes and potential expansion into Western Europe. KREF anticipates that repayments will surpass future funding obligations in 2024, with over $900 million in repayments already received this year.
InvestingPro Insights
As KKR Real Estate Finance Trust (NYSE:KREF) garners attention with its robust performance and BTIG's upgraded price target, investors may find additional insights from InvestingPro valuable. According to recent data, KREF has a market capitalization of approximately $787.63 million and is trading with a high P/E ratio of 55.74, which could imply expectations of future earnings growth. This is supported by the fact that analysts have revised their earnings upwards for the upcoming period, indicating a potential upside.
Moreover, KREF has demonstrated a significant dividend yield of 8.82%, which stands out to income-seeking investors. In terms of stock performance, KREF has shown strong returns over the last month and three months, with respective gains of 25.3% and 23.88%. These figures suggest that the stock has been resonating well with the market recently.
For investors seeking a deeper dive into KREF's financial health and future prospects, InvestingPro offers additional insights and metrics. There are 7 more InvestingPro Tips available, which can guide investment decisions. To access these tips and more detailed analytics, visit https://www.investing.com/pro/KREF. Don't forget to use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, enhancing your investment research with comprehensive data and expert insights.
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