On Friday, Mizuho Securities adjusted its outlook on Rexford Industrial Realty, a real estate investment trust listed on the New York Stock Exchange under the ticker NYSE:REXR. The firm's price target on the stock was lowered to $50.00 from the previous $52.00, while the neutral rating on the shares was maintained.
The adjustment comes in light of several factors impacting Rexford's financial projections. Mizuho cited a forecasted decrease in net operating income (NOI) for the fiscal year 2025, driven by an anticipated lower core same-store (SS) growth now estimated at 7%. Additionally, the firm expects a longer timeframe for the lease-up of redevelopment assets, which, along with dilution from redevelopment activities, could weigh on the company's financial performance.
Despite these challenges, Mizuho notes that some negative impacts are being partially balanced by the accretive nature of recent deals that Rexford has executed. The new price target of $50 is derived from applying a target capitalization rate, commonly referred to as a cap rate, to the company's projected forward 12-month NOI.
The applied cap rate of 5.25% corresponds with current market levels, according to Mizuho's analysis. This cap rate is a tool used to estimate the investor's potential return on an investment, reflecting the relationship between a property's net income and its purchase price. Mizuho's methodology involves projecting the income that Rexford's properties are expected to generate over the coming year and then applying the cap rate to arrive at the price target.
InvestingPro Insights
As Mizuho Securities maintains a neutral stance on Rexford Industrial Realty (NYSE:REXR), the InvestingPro platform provides additional insights that could be crucial for investors evaluating the company's stock. With a market capitalization of $10.06 billion, Rexford stands as a significant player in the industrial real estate sector. The company's P/E ratio, currently at 40.57, indicates a high valuation in terms of earnings. This is further emphasized by the adjusted P/E ratio for the last twelve months as of Q1 2024, which is slightly higher at 43.78.
Investors looking for growth might find Rexford's revenue growth numbers encouraging. The company has seen a 22.02% growth in revenue in the last twelve months as of Q1 2024, with a gross profit margin of 77.09%, underlining the company's ability to maintain profitability. Moreover, analysts anticipate sales growth in the current year, aligning with Mizuho's note on the accretive nature of recent deals. This could signal a positive outlook for the company's financial trajectory despite the challenges mentioned.
Dividends are often a key factor for income-focused investors, and Rexford has a track record of raising its dividend for 11 consecutive years. The current dividend yield stands at 3.74%, reflecting a solid income stream for shareholders. Additionally, the company's dividend growth over the last twelve months as of Q1 2024 is at 9.87%, showcasing its commitment to returning value to its investors.
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