On Tuesday, Truist Securities updated its outlook on shares of Plymouth Industrial REIT (NYSE:PLYM), raising the price target to $26.00 from $24.00 while maintaining a Buy rating on the stock. The adjustment reflects a positive view on the company's recent leasing activities and a lower interest rate environment.
The analyst from Truist Securities reaffirmed the 2024 normalized funds from operations (FFO) estimate at $1.88 per share, aligning with the lower end of the company's guidance range of $1.88 to $1.90 per share. Additionally, the 2025 normalized FFO estimate has been revised upward to $2.09 per share from the previous $2.08 per share.
Key assumptions underlying the firm's model for 2024 include the expectation that FedEx (NYSE:FDX) space in St. Louis will be vacant after July 31, 2024, projections of $100 million in acquisitions, $30 million in dispositions, 20% blended lease spreads, and a 79% recovery rate in the second half of 2024.
The new price target is based on a combination of valuation methods, including a discounted cash flow estimate of $29.68 (one-third weighting), a 20% assumed discount to the projected net asset value (NAV) a year from now (one-third), and 11 times the estimated 2024 FFO per share (one-third).
At the time of the report, Plymouth Industrial REIT's shares were trading at a 24% discount to Truist Securities' NAV estimate. This represents a larger discount compared to the 20% average discount to consensus NAV observed over the past three years. The stock's valuation, according to the analyst, also stands at 11 times the estimated 2024 FFO.
In other recent news, Boston-based Plymouth Industrial REIT disclosed robust Q2 2024 financial results, exceeding expectations and demonstrating improved financial health with leverage decreasing to 6.4 times. The company expanded its market presence by successfully acquiring a property in Memphis, bringing their total to nearly 7 million square feet. This was accompanied by the third highest leasing volume in Plymouth's history, signaling strong tenant demand.
Recent developments include strategic expansions and a development program nearing completion, with full stabilization expected by 2025. Additionally, Plymouth reported about 2 million square feet of leases in progress and high tenant interest in renewals. Despite a temporary dip in occupancy in Q3, the company expects a rebound to around 98% by year-end.
Analysts noted potential challenges in leasing up certain properties and longer decision-making times for Class A space due to financing needs for manufacturing equipment. However, the overall outlook remains positive, with strong demand in markets anticipated to continue and full benefits from the development program to be seen in 2025.
InvestingPro Insights
InvestingPro data highlights Plymouth Industrial REIT's (NYSE:PLYM) current market dynamics, providing a snapshot of its financial health and market performance. With a market capitalization of $1.06 billion and a trailing twelve-month revenue of $199.46 million, the company shows a modest revenue growth of 2.6%.
However, the company's P/E ratio stands at a high 43.27, reflecting a premium that investors are willing to pay for its earnings. Despite this, the company's PEG ratio, which measures the P/E relative to earnings growth, is low at 0.21, suggesting that the market may expect future growth to come at a bargain.
InvestingPro Tips underscore the mixed outlook for Plymouth Industrial REIT. While the company is trading at a high earnings multiple, it has been profitable over the last twelve months. This profitability is a positive sign, but analysts express caution, noting that net income is expected to drop this year and that the company may not be profitable this year.
Moreover, the company's short-term obligations exceed its liquid assets, which could pose financial challenges. For investors seeking a deeper analysis, there are 6 additional InvestingPro Tips available for Plymouth Industrial REIT at https://www.investing.com/pro/PLYM, offering insights that could inform investment decisions.
These financial metrics and expert tips provide a nuanced view of Plymouth Industrial REIT's position in the market, complementing the updated outlook from Truist Securities. The combination of detailed financial data and professional analysis can help investors make more informed decisions regarding their investments in the real estate sector.
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