Barclays Takes A Look At Douglas Emmett's New Guidance

Barclays analyst Ross Smotrich took a fresh look at Douglas Emmett, Inc. DEI following the company's first-quarter results and forecast. The brokerage maintains its Underweight rating and the $31.00 price target.

The analyst noted that Douglas Emmett's first-quarter FFO was in line with his expectations and represented a 0.1 percent year-over-year increase; the results exceeded consensus by a penny. Also, Smotrich took into consideration the increased and narrowed FFO outlook of $1.74–$1.80 compared to the $1.70–$1.80 range provided earlier. The latest outlook implies a year-over-year growth of 8.6 percent.

"Overall, fundamentals remained stable. SSNOI decelerated slightly in the quarter to +2.7 percent (from +3.0 percent in 4Q15), driven by lower growth in the multifamily portfolio. The company also completed its previously announced acquisition of a Class A office portfolio (four buildings) in Westwood, CA for a gross price of $1.34 billion ($779 psf)," the analyst said in a research note.

Following the company's move, the brokerage also boosted its 2016 FFO estimation to $1.77 a share from $1.75. Also of significance, the consensus estimate is likewise at $1.77 a share.

Barclays believes important factors contributing to the higher outlook include superior cash SSNOI growth of 4.5–5.5 percent compared to the earlier 4.5 percent forecast (ex Westwood portfolio acquisition impact).

The brokerage concluded by saying, "We assume 91.3 percent average occupancy and project +4.7 percent SSNOI growth for 2016. Our estimates imply 8.7 percent FFO growth in 2016, 5.7 percent in 2017, and a five year CAGR of 6.0 percent."

At time of writing, the stock was trading down 2 percent at $33.35.