On Thursday, Keefe, Bruyette & Woods maintained its Outperform rating on shares of Ladder Capital Corp (NYSE:LADR) with a steady price target of $12.50. The firm's stance comes after Ladder Capital's recent announcement on July 5, 2023, regarding the issuance of $500 million in senior unsecured notes at a 7% interest rate, maturing in 2031. The proceeds from this issuance are intended to repay secured debt and to serve general corporate purposes.
Ladder Capital's strategic move to issue these notes is seen as a step towards optimizing its capital structure. The firm anticipates that this action will be leverage neutral despite the cost of debt being slightly higher than the first quarter's average of 6.3%. The estimated impact on the company's earnings per share (EPS) is a slight dilution of $0.02 to $0.03 in the near term and $0.02 by the year 2025.
The financial institution views the decision to increase the proportion of unsecured debt in Ladder Capital's funding mix as a positive development. The share of unsecured debt is expected to rise to 56% from the previous 42%. This change is seen as enhancing the company's financial flexibility.
Ladder Capital is currently trading at 0.84 times its book value, which is considered attractive by the firm. This valuation comes in the context of the company's robust liquidity position and relatively low leverage, which are key factors in the firm's positive outlook on the stock.
In other recent news, Ladder Capital Corp has seen significant developments with its financial performance and strategic moves. The company reported robust earnings for the first quarter of 2024, with distributable earnings reaching $42.3 million, or $0.33 per share, and a return on equity of 10.8%. Furthermore, Ladder Capital Corp boosted its liquidity to over $1.5 billion while decreasing its adjusted leverage to 1.5x.
The company's board of directors approved a quarterly dividend of $0.23 per share for the second quarter of 2024, indicating a steadfast commitment to shareholder returns. In addition to these financial highlights, Wolfe Research initiated coverage on Ladder Capital, assigning an Outperform rating and setting a price target of $13.00, suggesting a potential upside of 24%.
Ladder Capital's management team has expressed a cautiously optimistic outlook, anticipating an increase in loan closings due to the current steepening yield curve, despite challenges in the commercial real estate sector.
The company also received approximately $400 million in payoffs in their loan and securities portfolio, marking the highest since Q1 2022. These recent developments underscore Ladder Capital's commitment to maintaining a strong financial position and delivering attractive risk-adjusted returns for investors.
InvestingPro Insights
As Ladder Capital Corp (NYSE:LADR) navigates its capital structure optimization with the recent issuance of senior unsecured notes, the company's financial health and market performance provide additional context for investors.
With a market capitalization of $1.48 billion and a price-to-earnings (P/E) ratio of 15.23, Ladder Capital appears to maintain a solid standing in the market. Notably, the company's dividend yield is a substantial 8.06%, reflecting a strong commitment to returning value to shareholders, which has been consistent over the last 10 consecutive years.
InvestingPro Tips for LADR highlight the company's significant dividend payments and its ability to maintain these disbursements, which is particularly relevant given the firm's recent debt issuance. Moreover, Ladder Capital's liquid assets surpassing short-term obligations suggest a robust liquidity position that aligns with the positive assessment by Keefe, Bruyette & Woods. With analysts predicting profitability for the year and a trading position near its 52-week high, LADR's stock price movements, although volatile, indicate a potentially attractive opportunity for investors.
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